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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell Denny's Corporation ( NASDAQ:DENN ), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Denny's Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when CEO, President & Director John Miller sold US$2.3m worth of shares at a price of US$18.25 per share. That means that an insider was selling shares at below the current price (US$18.35). Even though it doesn't necessarily mean anything, that's certainly not a positive sign, in our book. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. Please note, however, that this single sale was just 18.8% of John Miller's stake.
We note that in the last year insiders divested 291.94k shares for a total of US$4.9m. All up, insiders sold more shares in Denny's than they bought, over the last year. They sold for an average price of about US$16.78. It's not particularly great to see insiders were selling shares around current prices. Since insiders sell for many reasons, we wouldn't put too much weight on it. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Denny's Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at Denny's. In total, insiders sold US$2.6m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Denny's insiders own 3.5% of the company, worth about US$39m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Does This Data Suggest About Denny's Insiders?
Insiders sold stock recently, but they haven't been buying. And there weren't any purchases to give us comfort, over the last year. On the plus side, Denny's makes money, and is growing profits. Insiders own shares, but we're still pretty cautious, given the history of sales. So we'd only buy after careful consideration. Of course, the future is what matters most . So if you are interested in Denny's, you should check out this free report on analyst forecasts for the company .
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org . This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.