One of the things I love about working on this series of Insider Weekends posts each weekend is discovering new companies that I might not have looked at otherwise. This week I came across Insurance Auto Auctions or IAA (IAA), a company, as the name indicates, runs auctions for insurance companies that are getting rid of totaled cars. Fleet operators that want to sell high mileage cars or dealers that want to clear their lot of overflow or damaged vehicles can also use IAA. The company was spun out of KAR Auction Services Inc. (KAR) in June 2019.
Given the kinds of vehicles IAA sells, I would have expected a low margin business but was surprised to find that the company sports gross margin approaching 40%, EBITDA margin of 30% and net income margin of 16%. As you can guess by looking at the EBITDA and net income margins, the business is leveraged with net debt of $2.31 billion for a company with a market cap of $4.76 billion. IAA’s bigger brother Copart (CPRT), sports even more impressive margins with gross margin approaching 50% and net income margin of nearly 35%. To put this in perspective, Copart’s net income margin exceeds that of Apple (AAPL), Meta Platforms (FB) and Alphabet (GOOG). These margins at Copart are not a pandemic related phenomenon on account of the recent demand for used cars. Net income margin was also above 30% pre-pandemic and the company managed to keep it above that threshold during the entire pandemic.
IAA and Copart together pretty much own the market in this segment of the vehicle auction business. Both companies saw their revenue grow more than 30% last quarter. Growth in the future is expected to moderate but they still expect to notch double digit revenue growth. Given its leveraged balance sheet and lower margins, IAA sells at a significant discount compared to Copart. IAA is just starting to ramp up internationally while Copart already has a presence in nearly a dozen countries.
This is the first insider purchase at IAA since the company was spun off. Multiple insiders have exercised shares recently without selling them, which we view as a positive sign. Peter Kamin has been an independent director of IAA since its spin-off in June 2019. He is a Managing Partner at 3K Limited Partnership and was previously the Founding Partner at ValueAct Capital from 2000 to 2011. We have tracked Mr. Kamin’s insider purchases over the years and while he did well with his purchases of Unilens Vision in 2014 and more recently with his well timed purchases of Interpace Biosciences Inc (IDXG), I have also seen him get into Tile Shop Holdings (TTS) very early. He continued averaging down into Tile Shop Holdings from 2017 to 2019 and benefited from the eventual rebound in the stock from near penny stock territory.
Welcome to edition 607 of Insider Weekends. Insider buying declined last week with insiders purchasing $154.03 million of stock compared to $228.41 million in the week prior. Selling also decreased to $946.14 million compared to $1.63 billion in the week prior.
Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week dropped to 6.14. In other words, insiders sold more than 6 times as much stock as they purchased. The Sell/Buy ratio this week was favorable compared to the prior week when the ratio stood at 7.14.
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Notable Insider Buys:
1. Asana, Inc. (ASAN): $63.14
President, CEO, & Chair Dustin A. Moskovitz acquired 1,250,000 shares of this work management platform, paying $70.42 per share for a total amount of $88.03 million. Mr. Moskovitz increased his stake by 7.01% to 19,089,676 shares with this purchase.
You can view the list of recent insider transactions for Asana, Inc. here.
|P/E: N/A||Forward P/E: -64.43||Industry P/E: 51.98|
|P/S: 36.13||Price/Book: 47.51||EV/EBITDA: -52.34|
|Market Cap: $12.1B||Avg. Daily Volume: 4,536,296||52 Week Range: $25.41 – $145.79|
2. Newmark Group, Inc. (NMRK): $17.54
Chairman Howard W. Lutnick acquired 377,000 shares of this real estate services company, paying $17.02 per share for a total amount of $6.42 million. These shares were purchased indirectly through a trust.
You can view the list of recent insider transactions for Newmark Group, Inc. here.
|P/E: 4.62||Forward P/E: 8.77||Industry P/E: 70.28|
|P/S: 1.28||Price/Book: 2||EV/EBITDA: 28.72|
|Market Cap: $3.73B||Avg. Daily Volume: 1,249,703||52 Week Range: $9.35 – $19.1|
3. PennyMac Financial Services, Inc. (PFSI): $59.36
Director Farhad Nanji acquired 95,982 shares of this mortgage origination and services company, paying $60.88 per share for a total amount of $5.84 million. These shares were purchased indirectly by MFN Partners.
You can view the list of recent insider transactions for PennyMac Financial Services, Inc. here.
|P/E: 3.99||Forward P/E: 4.25||Industry P/E: 7.83|
|P/S: 0.94||Price/Book: 0.99||EV/EBITDA: N/A|
|Market Cap: $3.38B||Avg. Daily Volume: 636,737||52 Week Range: $55.11 – $71.52|
4. IAA, Inc. (IAA): $35.31
Director Peter Kamin acquired 110,000 shares of this auction solutions provider for total loss, damaged, and low-value vehicles, paying $35.76 per share for a total amount of $3.93 million. These shares were purchased indirectly by various trusts.
You can view the list of recent insider transactions for IAA, Inc. here.
|P/E: 16.2||Forward P/E: 14.71||Industry P/E: 55.65|
|P/S: 2.59||Price/Book: 14.25||EV/EBITDA: 12.99|
|Market Cap: $4.76B||Avg. Daily Volume: 1,208,738||52 Week Range: $34.27 – $64.55|
5. Paramount Global (PARA): $28.38
Director Shari Redstone acquired 104,650 shares of this media and entertainment company, paying $28.61 per share for a total amount of $2.99 million. These shares were purchased indirectly by various trusts.
You can view the list of recent insider transactions for Paramount Global here.
|P/E: 4.26||Forward P/E: 8.98||Industry P/E: 16.03|
|P/S: 0.65||Price/Book: 0.82||EV/EBITDA: 4.80|
|Market Cap: $17.25B||Avg. Daily Volume: 15,630,270||52 Week Range: $27.62 – $101.97|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. Bunge Limited (BG): $99.3
Shares of this agribusiness and food company were sold by 4 insiders:
You can view the list of recent insider transactions for Bunge Limited here.
|P/E: 7.38||Forward P/E: 11.6||Industry P/E: 20.80|
|P/S: 0.24||Price/Book: 1.93||EV/EBITDA: 8.31|
|Market Cap: $13.95B||Avg. Daily Volume: 1,033,587||52 Week Range: $71.73 – $103.59|
2. Ameriprise Financial, Inc. (AMP): $300.56
Shares of this asset management company were sold by 4 insiders:
You can view the list of recent insider transactions for Ameriprise Financial, Inc. here.
|P/E: 16.34||Forward P/E: 10.15||Industry P/E: 14.02|
|P/S: 2.59||Price/Book: 5.92||EV/EBITDA: 8.13|
|Market Cap: $33.33B||Avg. Daily Volume: 669,545||52 Week Range: $213.38 – $332.37|
3. Lithia Motors, Inc. (LAD): $322.66
Shares of this automotive retailer were sold by 3 insiders:
You can view the list of recent insider transactions for Lithia Motors, Inc. here.
|P/E: 8.83||Forward P/E: 8.06||Industry P/E: 18.10|
|P/S: 0.43||Price/Book: 2.1||EV/EBITDA: 7.71|
|Market Cap: $9.83B||Avg. Daily Volume: 387,661||52 Week Range: $274.03 – $417.98|
4. Snap Inc. (SNAP): $38.01
Shares of this camera company were sold by 4 insiders:
You can view the list of recent insider transactions for Snap Inc. here.
|P/E: N/A||Forward P/E: 37.63||Industry P/E: 22.27|
|P/S: 15||Price/Book: 16.24||EV/EBITDA: -104.09|
|Market Cap: $61.74B||Avg. Daily Volume: 32,883,606||52 Week Range: $24.32 – $83.34|
5. AGNC Investment Corp. (AGNC): $13.44
Director, Executive Chair Gary D. Kain sold 600,000 shares of this mortgage REIT for $14.10, generating $8.46 million from the sale. 200,000 of these shares were sold indirectly by a trust.
You can view the list of recent insider transactions for AGNC Investment Corp. here.
|P/E: 11.02||Forward P/E: 5.82||Industry P/E: 8.80|
|P/S: 8.39||Price/Book: 0.8||EV/EBITDA: N/A|
|Market Cap: $7.02B||Avg. Daily Volume: 8,052,279||52 Week Range: $13.4 – $18.84|
You can view the full list of sales from this Insider Sales page.
Disclaimer: Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.