We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So shareholders might well want to know whether insiders have been buying or selling shares in Rentokil Initial plc (LON:RTO).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, such insiders must disclose their trading activities, and not trade on inside information.
We don’t think shareholders should simply follow insider transactions. 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 Rentokil Initial
Over the last year, we can see that the biggest insider purchase was by CEO & Executive Director Andrew Ransom for UK£262k worth of shares, at about UK£2.62 per share. Although we like to see insider buying, we note that this large purchase was at significantly lower prices. It may not shed much light on insider confidence at the current share price.
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!
I will like Rentokil Initial better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it’s a good sign if insiders own a significant number of shares in the company. It appears that Rentokil Initial insiders own 0.2% of the company, worth about UK£14m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At Rentokil Initial Tell Us?
The fact that there have been no Rentokil Initial insider transactions recently certainly doesn’t bother us. But insiders have shown more of an appetite for the stock, over the last year. Overall we don’t see anything to make us think Rentokil Initial insiders are doubting the company, and they do own shares. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Rentokil Initial.
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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.