Why Are Influential Insiders Selling Shares of These Companies?

Simulations Plus Inc. (NASDAQ:SLP) is a company that had not registered any insider purchases or sales since early 2011 until last week, so the recent insider selling at the company is definitely worth examining. Chief Executive Officer Walter S. Woltosz reported selling 58,181 shares on Friday and Monday at prices that ranged from $11.25 to $11.31 per share and currently owns 5.90 million shares.

The developer of drug discovery and development simulation, and modeling software has seen its shares advance by more than 71% over the past 12 months. In addition, the stock has gained more than 227% over the past five years, so it is not totally surprising that the CEO offloaded a portion of his stake in the past several days. The company currently provides seven software products for pharmaceutical research and development, but it has already started to expand its focus on the defense and health care outside the pharmaceutical industry. Simulations Plus reported net revenues of $4.84 million for the first fiscal quarter of 2016, up 18.4% year-on-year. Although the company has an extremely expensive forward P/E multiple of 31.71, the freshly-revealed plans of expanding its strategic focus can surely justify the current valuation. It is also worth mentioning that Simulations Plus’s business strategy focuses on promoting growth both organically and through acquisitions, so there might be more room to run for the company in the years ahead.

A mere four hedge funds monitored by Insider Monkey had stakes in the company at the end of the third quarter. Jeffrey Bronchick’s Cove Street Capital owns 150,000 shares of Simulations Plus Inc. (NASDAQ:SLP) as of the end of the third quarter.