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 Entercom Communications Corp. (NYSE:ETM).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
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 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'.
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Entercom Communications Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Chairman Emeritus Joseph Field bought US$2.9m worth of shares at a price of US$7.86 per share. That means that even when the share price was higher than US$6.26 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
Happily, we note that in the last year insiders paid US$26m for 3.9m shares. But they sold 70256 for US$542k. In the last twelve months there was more buying than selling by Entercom Communications insiders. They paid about US$6.64 on average. This is nice to see since it implies that insiders might see value around current prices. 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!
Entercom Communications is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Entercom Communications Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at Entercom Communications. Specifically, Joseph Field bought US$5.8m worth of shares in that time, and we didn't record any sales whatsoever. This is a positive in our book as it implies some confidence.
Does Entercom Communications Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Entercom Communications insiders own 15% of the company, currently worth about US$144m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Does This Data Suggest About Entercom Communications Insiders?
The recent insider purchase is heartening. And an analysis of the transactions over the last year also gives us confidence. But on the other hand, the company made a loss last year, which makes us a little cautious. When combined with notable insider ownership, these factors suggest Entercom Communications insiders are well aligned, and quite possibly think the share price is too low. That's what I like to see! Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Entercom Communications.
But note: Entercom 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.
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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.