Sonic: 4 Different Insiders Have Sold Shares This Year

In this article, I will feature one restaurant that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:

1. The stock was sold by three or more insiders within one month.


2. The stock was not purchased by any insiders in the month of intensive selling.


3. At least two sellers decreased their holdings by more than 10%.

Sonic Corp. (SONC) operates and franchises a chain of quick-service drive-in restaurants in the United States.

(click to enlarge)

Insider selling during the last 30 days

Here is a table of Sonic's insider-trading activity during the last 30 days by insider.

Name	Title	Trade Date	Shares Sold	Rule 10b5-1	Current Ownership	Decrease In Ownership
Robert Rosenberg	Director	Jan 10-23	45,125	No	88,397 shares	33.8%
Stephen Vaughan	CFO	Jan 21-22	24,500	No	81,657 shares	23.1%
Douglas Benham	Director	Jan 15-16	21,764	No	0 shares	100%
Michelle Britten	VP	Jan 10	4,181	No	0 shares	100%

There have been 95,570 shares sold by insiders during the last 30 days.

Insider selling by calendar month

Here is a table of Sonic's insider-trading activity by calendar month.

Month	Insider selling / shares	Insider buying / shares
January 2014	95,570	0
December 2013	49,851	0
November 2013	215,567	0
October 2013	44,306	0
September 2013	451,500	0
August 2013	0	0
July 2013	0	0
June 2013	0	0
May 2013	0	0
April 2013	132,124	0
March 2013	25,000	0
February 2013	1,800	0
January 2013	41,315	0

There have been 1,057,033 shares sold, and there have been zero shares purchased by insiders since January 2013.

Financials

Sonic reported the fiscal 2014 first-quarter, which ended November 30, financial results on January 6 with the following highlights:

Revenue	$126.7 million
Net income	$8.2 million
Cash	$95.9 million
Debt	$519.1 million

Outlook

Sonic's fiscal 2014 guidance is as follows:

Same-store sales growth	low single digits
Capital expenditures	$65-$70 million
Free cash flow	$15-$25 million

(click to enlarge)

(Source: Earnings presentation)

Competition

Sonic's competitors include Burger King Worldwide (BKW), and McDonald's (MCD). Here is a table comparing these companies.

Company	SONC	BKW	MCD	Industry Average (Restaurants)
Market Cap:	1.07B	8.10B	93.96B	904.57M
Employees:	11,233	10,870	N/A	6.91K
Qtrly Rev Growth (yoy):	0.01	-0.40	0.02	0.08
Revenue:	543.23M	1.28B	28.11B	416.93M
Gross Margin:	0.53	0.63	0.39	0.29
EBITDA:	132.01M	637.70M	10.09B	50.62M
Operating Margin:	0.17	0.45	0.30	0.08
Net Income:	38.78M	215.50M	5.59B	N/A
EPS:	0.67	0.60	5.55	0.43
P/E:	28.20	38.43	17.01	28.83
PEG (5 yr expected):	1.40	1.73	2.00	1.81
P/S:	2.05	6.42	3.37	1.86

Sonic is trading above the industry average P/S ratio.

Here is a table of these competitors' insider-trading activities during the last 12 months.

Company	Insider buying / shares	Insider selling / shares
BKW	0	0
MCD	425	150,669

Only Sonic has seen intensive insider selling during the last 30 days.

Conclusion

There have been four different insiders selling Sonic, and there have not been any insiders buying Sonic during the last 30 days. All four of these insiders decreased their holdings by more than 10%. Sonic has an insider ownership of 3.90%.

Before going short Sonic, I would like to get a bearish confirmation from the Point and Figure chart. The main reason for the proposed short entry is the intensive insider-selling activity.

Source: Sonic: 4 Different Insiders Have Sold Shares This Year

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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