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I have come to be wary of insider buying in companies that have seen a recent sharp decline in its price. The insiders in this scenario are either trying to signal the market or are anchored to old prices and probably see the stock as a bargain. I’ve been following the insider purchases by James DeFranco, the co-founder of satellite TV company DISH Network, for several years and every time I analyze the company, I come away with the conclusion that it is a melting ice cube that is best avoided.
Mr. DeFranco has been remarkably consistent in being wrong about the company’s stock price. He was buying in 2018 and 2019 when the stock was trading in the $30s, he was once again buying last year in the high teens and he just purchased nearly $25 million worth of stock last week.
The stock is down nearly 75% over the last five years and a large number of the “P” symbols you see on the chart above are his purchases. The one thing that stood out with these purchases from last week was the size and speed of the purchases. I have never seen him buy almost $25 million worth of stock in a single week.
DISH Network saw its revenue drop from $15.22 billion in 2015 to $12.81 billion in 2019. The pandemic and a couple of small acquisitions helped revenue rebound to $17.88 billion by 2021 but growth once again stalled in the last five quarters. EchoStar spun out its satellite broadcasting services in 2019 and merged that division with DISH in 2019. DISH entered the wireless retail segment and specifically postpaid mobile services through the $1.4 billion acquisition of Boost Mobile in 2020.
The company has a highly leveraged balance sheet with over $17.5 billion in net debt. The good news is that they still earn money, beat earnings estimates by a wide margin the last three quarters and free cash flow is positive. The stock trades at a trailing P/E of 2.92, a forward EV/EBITDA of 11.75 and at 0.31 times book value.