Anatomy of inside buying at MCZ

Over the weekend I was all excited about a stock I found during my research. Mad Catz Interactive (MCZ) looks like a good fundamental company.  What attracted me to it was its high ROE, low PE, and an EV/cfc that was even lower than the PE. I noticed it had run up since the beginning of this year and according to Yahoo had increased by 317% in the last 52 weeks. A quick look at Finviz showed  an high debt/equity ratio, but I figured that was one reason the ROE was 62%.

Assets = Equity + Debt 

Assets/Equity = 1 + Debt/Equity

Using the Dupont ROE formula

ROE= Net income/Sales * Sales/total Assets * total Assets/Equity
ROE= Net income/Sales * Sales/total Assets * 1 + Debt/Equity

Debt to Equity ratio is high and cash is high and inventory is high. They just made several acquisition of companies. What a combination of mixed signals.

I don't know anything about the industry, so I will leave that to another day.

Mad Catz Interactive, Inc. was founded in 1989. At what stage of the life cycle is this company? Market cap is 107M. In Yahoo that is listed as the 6th largest Market cap in its industry. It is paying off its debt with the extra cash, but then adding more. The stock fell ~10% on Monday after the announcement. 

Short sales have doubled from last month, but insiders are buying. Then I noticed that institutional buyers are selling. Interesting. I have never noticed that trend before. 


[edit::]
Wow! Just found a great site for insider information.


So who is right?