It is not uncommon to see companies perform well in the years after insiders buy shares. 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 TransAct Technologies Incorporated (NASDAQ:TACT).
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.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.
TransAct Technologies Insider Transactions Over The Last Year
The insider, Graham Tanaka, made the biggest insider sale in the last 12 months. That single transaction was for US$340k worth of shares at a price of US$10.62 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$12.12. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 21% of Graham Tanaka's holding.
Over the last year we saw more insider selling of TransAct Technologies shares, than buying. The average sell price was around US$10.63. It's not too encouraging to see that insiders have sold at below the current price. Since insiders sell for many reasons, we wouldn't put too much weight on it. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Based on our data, TransAct Technologies insiders have about 4.5% of the stock, worth approximately US$4.1m. We prefer to see high levels of insider ownership.
So What Do The TransAct Technologies Insider Transactions Indicate?
The fact that there have been no TransAct Technologies insider transactions recently certainly doesn't bother us. We don't take much encouragement from the transactions by TransAct Technologies insiders. We also note that, as far as we can see, insider ownership is fairly low, compared to other companies. Along with insider transactions, I recommend checking if TransAct Technologies is growing revenue. This free chart of historic revenue and earnings should make that easy.
Of course TransAct Technologies 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.
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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.