It is not uncommon to see companies perform well in the years after insiders buy shares. 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 shareholders might well want to know whether insiders have been buying or selling shares in Cars.com Inc. (NYSE:CARS).
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the 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 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 Cars.com
Over the last year, we can see that the biggest insider purchase was by Co-Founder T. Vetter for US$204k worth of shares, at about US$10.19 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$8.85). Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
Over the last year, we can see that insiders have bought 81961 shares worth US$795k. In the last twelve months Cars.com insiders were buying shares, but not selling. 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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insiders at Cars.com Have Bought Stock Recently
It's good to see that Cars.com insiders have made notable investments in the company's shares. In total, insiders bought US$795k worth of shares in that time, and we didn't record any sales whatsoever. This makes one think the business has some good points.
Insider Ownership of Cars.com
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. From our data, it seems that Cars.com insiders own 0.9% of the company, worth about US$5.3m. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!
So What Do The Cars.com Insider Transactions Indicate?
The recent insider purchases are heartening. And the longer term insider transactions also give us confidence. On this analysis the only slight negative we see is the fairly low (overall) insider ownership; their transactions suggest that they are quite positive on Cars.com stock. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Cars.com.
Of course Cars.com 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.
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.