Insiders opened up their wallets at the briskets pace in more than two months as measured by the number of purchase records. Executives and directors bought stock in nearly 600 companies last week, which is almost the same as the last two-weeks combined.
Hopefully, the heightened board room enthusiasm is a sign that the economy is going to gain strength in 2014 – fingers crossed.
As readers know, one of iStock favorite insider buying traits is the buyers past performance record. Studies have shown that insiders as a group outperform professional money managers i.e. mutual funds, hedge funds…
We like to take it one step further than just buying, iStock specifically targets insiders with a history of making the correct call. Extreme Networks Inc. (EXTR) Director, Maury Austin is taking a second bite of the apple.
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Extreme Networks provides network infrastructure equipment and services for enterprises, data centers, and service providers.
On May 17, 2012, Austin purchased 10,000 shares of the tech stock in the open market at $3.49 for a total investment of $34,900. Last week, he increased the share amount by 50% and invested 2.5 times more money. The Director added another 15,000 shares at $6.39 for a total of $95,850.
It is interesting to note that Austin's previous buy was close to 52-week low while last week's buy was near a 52-week high. We also see substantial differences based on price-to-sales (P/S) and price-to-earnings (P/E) ratios.
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In May of 2012, EXTR was trading at 31.67 times earnings and at 1.02 times sales. Last week, Austin was willing to pay 1.98 times sales, and an infinite P/E as Extreme is unprofitable at the moment.
Looking forward, Wall Street thinks EXTR will make $0.42 for fiscal 2014 on revenue of $556.37 million. The average P/E in ! the last five-years was 44.12 for the networking company, of course that's only when Extreme made money.
If the company trades at its average P/E multiple and meets the street's view, then Austin's $6.39 stock would be worth $15.53. The five-year, average price-to-sales multiple would need to expand to turn a profit for the Director this time. EXTR's average P/S ratio was 0.91 in the last half-decade, which translates to a price of $5.36 using 2014's consensus sales number.
Overall: It does appear Wall Street is widening Extreme Networks Inc. (EXTR) valuations at the moment. If the company can hit Wall Street's 2014 targets, there seems to be upside, which would make Maury Austin a two-time Extreme winner.
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