(By Rich Bieglmeier) Last week was littered with attention getting insider purchases. From Icahn Partners buying more Navistar International Corporation
) to activist shareholders Third Point, LLC adding another $38 million in Yahoo! Inc.
) to a flurry of buying an unheard of Howard Bancorp Inc.
), there were many to choose from for this week's insider buying roster.
However, iStock is always intrigued when news flow and insider activity contradict on the buy side. Why in the world would people who know the company best fork up big money when the stuff appears to be in the fan?
That's the case with Cosi Inc.
), and right before the chain of franchise restaurants reports earnings on Monday, August 6, 2012. On July 24th, 10 executive team members and directors dropped a cool $1.6 million shortly after the company received a delisting memo from the NASDAQ.
What the heck is going on here?
iStock turned the calendar back five months to February 9, 2012 to get a clue of what might be happening. Way back then, COSI entered into an agreement with Brad Blum, owner of BLUM Growth Fund, to provide consulting services related to branding, product development, merchandising and marketing in a collaborative effort to maximize long-term shareholder value.
Perhaps, we will see the fruits of this relationship emerge next Monday?
Last quarter, the restaurant chain announced a loss of 2 cents for the quarter, a penny less than Wall Street's forecast of -$0.03. For the current and second quarterly checkup, the street is targeting a profit of two cents – in line with our iEstimate of 2 cents.
On a price-to-sales basis and forward P/E basis, COSI has room for multiple expansions. The average peer trades for 0.95 times sales and at 20.51 times earnings. At the moment, Cosi is valued at 12.17 times 2013 estimate at a profit of 6 cents.
iStock didn't find anything alarming while examining COSI's first quarter financial statements.
We can't say for sure, but the combination of insider buying and no red flags in the 10-Q leads us to believe there will be no nasty surprises for shareholders to start next week.
In the last 52-weeks, COSI has been as high as $1.30 and as low as $0.56. If earnings and whatever management offers up during the conference call is encouraging enough to push shares above the 50-day average of $0.76, then iStock believes the price can ratchet its way up to $1.
One buck might just be the start as Mr. Blum has a tremendous track record of turning around names like Burger King, Romano's Macaroni Grill, and the Olive Garden. iStock suspects that the recent wave of insider buying at Cosi Inc. (COSI) is a clear signal that the company might be ready to join the impressive list.