We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Citizens Financial Group, Inc. (NYSE:CFG).
Do Insider Transactions Matter?
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, 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 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'.
Citizens Financial Group Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Independent Director Charles Koch for US$488k worth of shares, at about US$19.76 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$26.69. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
Over the last year, we can see that insiders have bought 46.17k shares worth US$1.0m. On the other hand they divested 4.50k shares, for US$100k. In total, Citizens Financial Group insiders bought more than they sold over the last year. They paid about US$21.87 on average. These transactions show that insiders have confidence to invest their own money in the stock, albeit at slightly below the recent price. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Does Citizens Financial Group Boast High Insider Ownership?
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. Insiders own 0.5% of Citizens Financial Group shares, worth about US$55m. 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 Citizens Financial Group Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in Citizens Financial Group and their transactions don't cause us concern. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. In terms of investment risks, we've identified 1 warning sign with Citizens Financial Group and understanding it should be part of your investment process.
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.
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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