It is not uncommon to see companies perform well in the years after insiders buy shares. 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 shareholders might well want to know whether insiders have been buying or selling shares in TopBuild Corp. ( NYSE:BLD ).
Do Insider Transactions Matter?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
We don’t think shareholders should simply follow insider transactions. 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.’
TopBuild Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by President & COO Robert Buck for US$1.1m worth of shares, at about US$77.50 per share. That is hardly a positive sign, even though it took place above the latest price (US$63.79). So it may not shed much light on insider confidence at current levels.
We note that in the last year insiders divested 33.79k shares for a total of US$2.3m. In total, TopBuild insiders sold more than they bought over the last year. The average sell price was around US$66.97. It’s not ideal to see that insiders have sold at around the current price of US$63.79. But we don’t put too much weight on the insider selling, since sellers could have personal reasons. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like TopBuild better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
TopBuild Insiders Are Selling The Stock
The last quarter saw substantial insider selling of TopBuild shares. In total, insiders sold US$1.2m worth of shares in that time, and we didn’t record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Does TopBuild Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. It appears that TopBuild insiders own 1.3% of the company, worth about US$29m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About TopBuild Insiders?
Insiders sold stock recently, but they haven’t been buying. Looking to the last twelve months, our data doesn’t show any insider buying. While insiders do own shares, they don’t own a heap, and they have been selling. So we’d only buy after careful consideration. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future .
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.
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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.