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Facebook Executives Reduce Positions

- By Kyle Ferguson

Multiple Facebook (FB) executives have been reducing their positions this month.

Mark Zuckerberg, the company's co-founder, chief operating officer and director, sold 380,636 shares of the company March 9 for $137.92 per share. Zuckerberg now owns 3,078,641 shares of the company.


Christopher Cox, the company's chief product officer, sold 16,000 shares of the company on March 7 for $137.73 per share. Cox now owns 295,649 shares.

David Wehner, the company's chief financial officer, sold 2,015 shares on March 1 for an estimated $136.66 per share. Wehner now owns 80,055 shares.

Headquartered in Menlo Park California, Facebook is an online social networking service. The company's mission is to give people the power to share and make the world more open and connected. Facebook reported that it had 1.03 billion daily active users in December 2015, an increase of 17% compared to December 2014 when it had 934 million daily active users. Facebook owns Instagram, Messenger, WhatsApp and Oculus virtual reality technology and content platform. Facebook along with its various apps serves billions of people across the globe.

Facebook has a market cap of $404.34 billion, a price-earnings (P/E) ratio of 40.09, an enterprise value of $374.89 billion and a price-book (P/B) ratio of 6.84.

According to GuruFocus, Facebook has a 9 of 10 financial strength rating with no debt. The company has a cash-debt ratio of 0.91, an equity-asset ratio of 0.91 and an Altman Z-Score of 44.20 indicating the company is in the safe zone and is not in danger of filing for bankruptcy within the next two years. Facebook has a Beneish M-Score of -2.50 indicating that the company is not a manipulator of its financial statements. The Piotroski F-Score of 8 indicates that Facebook has a healthy business situation.

The company has a 9 of 10 profitability and growth rating. It has an operating margin of 44.94%, a net margin of 36.97%, a return on assets (ROA) of 18.12% and a three-year revenue growth rate of 44.60%.

The executive insiders may have decided to reduce their positions in Facebook because the company has gained an estimated 18% since the beginning of January, and it has gained an estimated 26% over the previous year.

The executive insiders may have wanted to reduce their variance of the company's market price going down in the future by cashing out some of their profit.

It is also possible that the insiders know that Facebook is trading above its intrinsic value according to the Peter Lynch chart below, and that may have been another underlying reason behind their decisions to sell.

Below is a Peter Lynch chart that shows Facebook is trading above its intrinsic value.

Disclosure: Author does not own any shares of this company.

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This article first appeared on GuruFocus.