According to a filing with the SEC, Informatica Corporation (NASDAQ:INFA) Chief Marketing Officer Margaret Breya bought 4,000 shares of the company’s stock on January 29th at an average price of $36.21 per share. This gives her direct ownership of 34,000 shares if we include restricted stock units. Informatica is a $3.9 billion market cap business software and services company with a focus on products which help businesses manage and integrate data.
We track insider purchases because they tend to be bullish signs (read our analysis of studies on insider trading) since insiders will only buy the stock if they are confident the company will outperform expectations (if they were less confident or neutral they would prefer to diversify their wealth). Of course, not every stock bought by insiders outperforms the market and so it’s important to use insider purchases more like a stock screen- take a quick look at the resulting company and see if it is interesting enough to research further.
In the fourth quarter of 2012, Informatica’s revenues edged up 3% from Q4 2011, roughly in line with top-line growth rates from earlier in the year. Due to higher costs- sales and marketing expenses in particular- net income slipped 27% and for the full year Informatica Corporation reported 83 cents in earnings per share as opposed to $1.05 in the previous year. However, these earnings results beat market expectations and sent the stock up about 10%; it is now up 20% year to date after falling 18% last year. Informatica now trades at 44 times trailing earnings; the current-year P/E is 25. We think that it is too expensive for a value thesis, and the business does not appear to be growing. As a result we are not sure that this is a good insider purchase to imitate.