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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 we’ll take a look at whether insiders have been buying or selling shares in Federal Signal Corporation (NYSE:FSS).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. 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’.
The Last 12 Months Of Insider Transactions At Federal Signal
In the last twelve months, the biggest single sale by an insider was when Non-Executive Chairman Dennis Martin sold US$1.3m worth of shares at a price of US$23.14 per share. That means that an insider was selling shares at around the current price of US$22.71. While their view may have changed since the sale, this is not a particularly positive fact. We generally tread carefully if insiders have been selling on market, even if they sold slightly above the current price. The only individual insider seller over the last year was Dennis Martin.
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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Many investors like to check how much of a company is owned by 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. Insiders own 2.1% of Federal Signal shares, worth about US$28m. 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 Federal Signal Insiders?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. We don’t take much encouragement from the transactions by Federal Signal insiders. The modest level of insider ownership is, at least, some comfort. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Federal Signal.
Of course Federal Signal may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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 email@example.com. 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.