It is not uncommon to see companies perform well in the years after insiders buy shares. 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 we'll take a look at whether insiders have been buying or selling shares in Care.com, Inc. (NYSE:CRCM).
Do Insider Transactions Matter?
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.
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.'
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Care.com Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the CFO & Executive VP, Michael Echenberg, for US$190k worth of shares, at about US$19.95 per share. 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$14.80. So it may not tell us anything about how insiders feel about the current share price.
We note that in the last year insiders divested 43514 shares for a total of US$820k. Insiders in Care.com didn't buy any shares in the last year. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Care.com Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Care.com shares. In total, insiders sold US$808k worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
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. Care.com insiders own about US$27m worth of shares. That equates to 5.6% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Care.com Insider Transactions Indicate?
Insiders sold Care.com shares recently, but they didn't buy any. And there weren't any purchases to give us comfort, over the last year. But it is good to see that Care.com is growing earnings. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We're in no rush to buy! Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Care.com.
Of course Care.com may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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 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.