We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Darden Restaurants, Inc. (NYSE:DRI), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.
Darden Restaurants Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Director, William Simon, sold US$164k worth of shares at a price of US$105 per share. That means that even when the share price was below the current price of US$120, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 1325% of William Simon's stake.
We note that in the last year insiders divested 3442 shares for a total of US$397k. Insiders in Darden Restaurants didn't buy any shares in the last year. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at Darden Restaurants Have Sold Stock Recently
The last three months saw significant insider selling at Darden Restaurants. In total, insiders sold US$193k 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.
Does Darden Restaurants 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 Darden Restaurants insiders own 0.3% of the company, worth about US$38m. 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 Darden Restaurants 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. But it is good to see that Darden Restaurants is growing earnings. 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 Darden Restaurants, 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.
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.
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.