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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 Emerson Electric Co. (NYSE:EMR).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 Emerson Electric
Edward Monser made the biggest insider sale in the last 12 months. That single transaction was for US$4.6m worth of shares at a price of US$76.36 each. That means that an insider was selling shares at around the current price of US$67.74. 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.
We note that in the last year insiders divested 99.55k shares for a total of US$7.4m. In total, Emerson Electric insiders sold more than they bought over the last year. The average sell price was around US$74.10. It’s not particularly great to see insiders were selling shares around current prices. While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like Emerson Electric better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Emerson Electric Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Emerson Electric shares. In total, Surendralal Karsanbhai dumped US$617k 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. We usually like to see fairly high levels of insider ownership. Emerson Electric insiders own 0.7% of the company, currently worth about US$287m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The Emerson Electric Insider Transactions Indicate?
An insider sold Emerson Electric shares recently, but they didn’t buy any. And even if we look to the last year, we didn’t see any purchases. But it is good to see that Emerson Electric is growing earnings. The company boasts high insider ownership, but we’re a little hesitant, given the history of share sales. Of course, the future is what matters most. So if you are interested in Emerson Electric, 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.
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.