We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Novanta Inc. (NASDAQ:NOVT).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, such insiders must disclose their trading activities, and not trade on inside information.
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.’
The Last 12 Months Of Insider Transactions At Novanta
In the last twelve months, the biggest single sale by an insider was when Chairman Stephen Bershad sold US$34m worth of shares at a price of US$68.15 per share. That means that an insider was selling shares at around the current price of US$60.56. They might be selling for a variety of reasons, but it’s hard to argue this is a bullish sign. Arguably, insider selling at around current prices should give us reason to reflect on whether the stock is fully valued at the moment.
In the last twelve months insiders netted US$34m for 503.68k shares sold. In total, Novanta insiders sold more than they bought over the last year. The average sell price was around US$68.17. We don’t gain much confidence from insider selling near the recent share price. While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. You can see a visual depiction of insider transactions over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insiders at Novanta Have Sold Stock Recently
The last three months saw significant insider selling at Novanta. Specifically, Stephen Bershad ditched US$34m 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.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Novanta insiders own about US$92m worth of shares (which is 4.3% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Does This Data Suggest About Novanta Insiders?
An insider sold stock recently, but they haven’t been buying. Looking to the last twelve months, our data doesn’t show any insider buying. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. So we’d only buy after careful consideration. Of course, the future is what matters most. So if you are interested in Novanta, you should check out this free report on analyst forecasts for the company.
But note: Novanta may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.