We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in GTT Communications, Inc. (NYSE:GTT).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. 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 GTT Communications
In fact, the recent sale by Richard Calder was the biggest sale of GTT Communications shares made by an insider individual in the last twelve months, according to our records. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$8.52. So it is hard to draw any strong conclusion from it.
In the last twelve months insiders purchased 76840 shares for US$600k. But they sold 66393 for US$1.8m. Over the last year we saw more insider selling of GTT Communications shares, than buying. The sellers received a price of around US$27.13, on average. We are not joyful about insider selling. But we note that the selling, on average, was at well above the recently traded price of US$8.52. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at GTT Communications Have Bought Stock Recently
There has been significantly more insider buying, than selling, at GTT Communications, over the last three months. In total, seven insiders bought US$561k worth of shares in that time. But insiders only sold shares worth US$424k. The buying outweighs the selling, which suggests that insiders may believe the company will do well in the future.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 8.0% of GTT Communications shares, worth about US$39m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At GTT Communications Tell Us?
The recent insider purchases are heartening. But we can't say the same for the transactions over the last 12 months. While recent transactions indicate confidence in GTT Communications, insiders don't own enough of the company to overcome our cautiousness about the longer term transactions. Overall they seem reasonably aligned. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
But note: GTT Communications 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.
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.