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 we'll take a look at whether insiders have been buying or selling shares in Denny's Corporation (NASDAQ:DENN).
What Is Insider Selling?
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.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
The Last 12 Months Of Insider Transactions At Denny's
The CEO, President & Director, John Miller, made the biggest insider sale in the last 12 months. That single transaction was for US$2.3m worth of shares at a price of US$18.25 each. That means that even when the share price was below the current price of US$22.29, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 19% of John Miller's holding.
We note that in the last year insiders divested 306488 shares for a total of US$6.3m. In the last year Denny's insiders didn't buy any company stock. The chart below shows insider transactions (by individuals) over the last year. 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 Denny's Have Sold Stock Recently
The last quarter saw substantial insider selling of Denny's shares. In total, insiders dumped US$3.2m 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 Denny's Boast High Insider Ownership?
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Denny's insiders own about US$45m worth of shares. That equates to 3.4% of the company. 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 Do The Denny's Insider Transactions Indicate?
Insiders sold Denny's shares recently, but they didn't buy any. Looking to the last twelve months, our data doesn't show any insider buying. But since Denny's is profitable and growing, we're not too worried by this. Insiders own shares, but we're still pretty cautious, given the history of sales. We'd think twice before buying! Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Denny's.
Of course Denny's 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.
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.