Our first foray into insider buying stocks has started off fairly well. We wrote about Calumet Specialty Products Partners LP (CLMT) last Tuesday. It opened last Tuesday at $13.66 and closed yesterday at $15.92, up 16.5% in a week. Add in its annual dividend of 13.6% and if the stock doesn’t move another penny for the next 11 months, our readers will have a total return in excess of 30%; not too bad.
This week we find Grand Canyon Education, Inc. (LOPE) in our insider buying crosshairs. Grand Canyon Education, Inc. provides online postsecondary education services in the United States. It focuses on offering graduate and undergraduate degree programs in education, business, and healthcare disciplines.
Between Mach 6th and June 3rd, three insiders have bought 3120 shares of LOPE, totaling $40,692. Now we realize that is not a lot of shares or money, but when you consider their timing (see the chart below), it may say more than meets the eye. When these directors were buying, the stock was trading near its low. If they though business was going to get worse, not better, then why not wait until the stock is $10 or $5?
The true story is that their business is going well. According to the analysts that follow LOPE, they expect the Education & Training Services company to grow their revenue by almost 60% in 2009. This year’s earnings per share growth expectations stand at unreal 270%, next year’s projected earnings growth rate is 47%. Compare any of these growth rates to LOPE’s forward P/E of just 14.68 and there is plenty of room for this stock to move.
Beyond the no brainer forward P/E versus growth rate comparisons, we find other key metrics attractive as well. Return on equity stands at a lofty 23.6%. LOPE’s return on equity keeps good company as Warren Buffet says anything over 14 is good enough for him. The Investors Business Daily found that the biggest winners or all-time had a return of equity of at least 17. Considering Grand Canyon’s growth rates and low forward P/E, it’s no surprise to us to see a .68 PEG ratio for LOPE. PEG ratios are life golf scores, the lower the better. We also like the fact that insiders hold 2 out of 3 shares outstanding. Considering how much they already own, any additional insider buying speaks volumes.
Looking at LOPE’s stock chart, our technical analysis sees a double bottom at $13 and our favorite buy signal, a MACD crossover under zero. This makes trading LOPE fairly straight forward, buy the stock now and if it closes below $13 get out. For a little more wiggle room, our stop calculator says set your stops at $12.52.
Our Correct Call Calendar readers will find two day trade ideas that we expect to pick up on yesterday’s momentum. They should also be happy with yesterday’s trading earnings idea. Hopefully today’s trading earning pick form yesterday’s Correct Call Calendar will make it 3 for 3 for the week.
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