We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Ebix, Inc. (NASDAQ:EBIX).
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, such insiders must disclose their trading activities, and not trade on inside information.
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 Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
Ebix Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Chairman, Robin Raina, for US$1.5m worth of shares, at about US$33.41 per share. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The silver lining is that this sell-down took place above the latest price (US$19.42). So it may not shed much light on insider confidence at current levels. Notably Robin Raina was also the biggest buyer, having purchased US$3.2m worth of shares.
Happily, we note that in the last year insiders paid US$3.2m for 225.17k shares. But insiders sold 54.02k shares worth US$1.7m. In the last twelve months there was more buying than selling by Ebix insiders. The average buy price was around US$14.07. It is certainly positive to see that insiders have invested their own money in the company. However, we do note that they were buying at significantly lower prices than today's share price. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Does Ebix 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. A high insider ownership often makes company leadership more mindful of shareholder interests. Ebix insiders own about US$142m worth of shares (which is 24% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Ebix Tell Us?
It doesn't really mean much that no insider has traded Ebix shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. Judging from their transactions, and high insider ownership, Ebix insiders feel good about the company's future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To that end, you should learn about the 2 warning signs we've spotted with Ebix (including 1 which is a bit concerning).
Of course Ebix may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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