SEI Investments: A Contrarian’s Gem Amid Insider Selling and Mixed Metrics

The recent $4.2 million insider sale by SEI Investments Co (NASDAQ: SEIC) Executive Vice President Michael Peterson has sparked investor scrutiny. Yet, beneath the surface of this transaction lies a compelling contrarian opportunity. SEI’s robust financial metrics—7.77% year-over-year revenue growth, a 55.13% gross margin, and undervalued ratios—suggest the stock is primed for long-term gains. While insider selling often raises eyebrows, a closer look reveals this may be a tactical misstep for investors to capitalize on.

The Insider Sale: Cause for Concern or a Distraction?

On May 15, 2025, Peterson sold 50,000 shares of SEI at an average price of $84.25, reducing his holdings to 13,500 shares. This transaction followed the exercise of options to acquire shares at prices as low as $56.54—a move that likely reflected profit-taking after a multi-year rise in SEI’s stock. Notably, this sale occurred near the company’s 52-week high of $87.25, and Peterson’s decision may have been driven by personal financial planning rather than pessimism about the company’s trajectory.

SEI’s leadership has seen other high-profile sales this year, including Alfred Paul West Jr.’s March sale of over 12 million shares and Mark Andrew Warner’s March transaction. However, such activity is not uncommon for executives with significant equity stakes. The key question is whether these sales reflect a broader lack of confidence—or if they create a buying opportunity for those focused on fundamentals.

Financial Fortitude: Metrics That Demand Attention

SEI’s Q1 2025 results underscore its competitive edge. The company reported $551.34 million in revenue, narrowly missing analyst expectations but exceeding EPS estimates ($1.17 vs. $1.15). Its consolidated operating profit margin hit 28.5%—its highest in three years—thanks to cost discipline and strategic initiatives in asset management and investment services. Piper Sandler’s recent upgrade to a Neutral rating, coupled with upward revisions to 2025 EPS estimates ($4.64 vs. $4.47), signals analyst confidence in SEI’s execution.

Valuation: The Undervalued Elephant in the Room

While SEI’s Price/Sales ratio of 5.13 exceeds industry averages, two critical metrics argue for its undervaluation:
1. P/E Ratio: SEI’s 18.47 P/E is below the industry average of 21.3, suggesting the market has not yet fully priced in its profitability.
2. EV/EBITDA: At 11.6, this metric is well below the sector’s 14.2 median, signaling a margin of safety for investors.

The company’s “GREAT” financial health score from InvestingPro and a five-year average ROE of 16% further validate its stability. Even GuruFocus’ modest overvaluation call (price-to-GF-Value ratio of 1.15) overlooks the potential for margin expansion and new product launches, such as its AI-driven wealth management tools.

Why Now Is the Time to Buy

The contrarian case for SEI hinges on three factors:
1. Sector Leadership: SEI’s dominant position in institutional asset management, with 17% market share in the U.S., provides a moat against competition.
2. Margin Resilience: Its 55.13% gross margin reflects pricing power and operational efficiency, even amid macroeconomic uncertainty.
3. Catalyst-Driven Growth: New leadership appointments (e.g., Lori Wayne’s promotion to COO) and the rollout of its cloud-based platform, SEI Catalyst, position the company to capture $1.2 trillion in global wealth management assets expected to shift to digital platforms by 2027.

Risks and Mitigations

Critics may cite the insider selling or the elevated Price/Sales ratio as reasons to avoid SEI. However, the latter metric is inflated by the company’s strategic investments in high-margin software solutions, which dilute near-term sales but boost long-term margins. Meanwhile, insider sales are a routine part of executive compensation and should not overshadow SEI’s fundamentals.

Final Call: Buy the Dip

SEI’s stock closed at $84.27 on May 15, down slightly from its 52-week high but still within striking distance of $90. With a 25.6% one-year return and a 10-year average annual return of 12%, the stock offers asymmetric upside. For investors with a three- to five-year horizon, now is an ideal entry point.

The contrarian play here is clear: ignore the noise of insider transactions and focus on SEI’s fundamentals. With undervalued metrics, a fortress balance sheet, and a business model primed for growth, this could be one of the decade’s best overlooked opportunities.

Action Item: Establish a position in SEI at current levels, with a target price of $95–$100 within 12–18 months.

Note: Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.