Guest post by Benzinga:
Insiders have the most transparent view when valuing the company’s share price because they run the day-to-day business operations. This could provide a significant advantage to traders and investors when considering an investment opportunity. When Executives sell large stakes in their own company, are they losing confidence? This could be the case for Quantum (QTM).
Recent Inside Seller
QTM VP Barbara Barrett sold 101,056 shares on 6/3/11. Richard Belluzzo sold 451,752 shares on 6/3/11. This represents roughly a third of Mr. Belluzzo’s overall holdings. Considering that he is the Chairman of the Board, this fact should be noted and considered. Also, there has been a great deal of selling from insiders since the gap up in share price on April 13th. Mid-April through the present date represents a great deal of selling compared to any other point within the last 12 month time frame.
Technical Analysis
The stock is currently in a long-term uptrend that began in August 2010. The share price recently attempted a break of the gap down from early February. This attempt was unsuccessful. Current movement of share price justifies a move lower prior to any potential rally. The nearest support level would represent an 8%-10% correction. Considering the recent increase in selling from insiders, this could extend further.
Quantum Corp’s price-to-earnings ratio is higher than 99% of its competitors in the Computer Storage industry. The trailing twelve month P/E ratio is over 161x, meaning investors are willing to pay 161-times for the stock than what the company reports in earnings. As a growth stock with skyrocketing sales, a high P/E ratio is justified. This is not the case with Quantum. From 2008 to 2010, the company’s yearly revenues have decreased 12.2% and QTM’s year-over-year revenues for Q4 (the most recent quarter) have only grown by 0.3% or at a compounded quarterly rate of 0.1%. This does not justify its high P/E ratio.
Quantum’s year-over-year operating income for Q4 has fallen 87% or at a compounded quarterly rate of -40%.
Price-to-cash flow measures the market expectation of the company’s future financial well-being. Quantum’s price-to-cash flow is higher than 95% of its competitors in the Computer Storage industry. The trailing twelve month P/CF ratio is 23.7x, which means investors are willing to pay 23-times for the stock than what the company earns in cash flows. QTM’s year-over-year cash flow from operations for Q4 has fallen by 47% or at a compounded quarterly rate of -14.9%.
Management Efficiency
QTM’s return on assets is 0.97% over the last twelve months; this means that Quantum is able to see gains on its assets on par with its competitors. QTM’s year-over-year total asset growth for Q4 (the most recent quarter) has decreased by 14.5% or at a compounded quarterly rate of -3.8%.
Quantum’s current ratio is 1.02x. This states that QTM’s current assets are essentially the same as its current liabilities, which essentially means that the company could have difficulty paying its short-term liabilities. On the other hand, the company’s gross margin is 42%, which is slightly better than its competitors in the Computer Storage industry. This basically means EPIQ has more cash to spend on business operations than its competitors.
This article is originally published at Benzinga.
