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We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Chegg, Inc. (NYSE:CHGG), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.
The Last 12 Months Of Insider Transactions At Chegg
The Director, Theodore Schlein, made the biggest insider sale in the last 12 months. That single transaction was for US$1.0m worth of shares at a price of US$28.84 each. That means that even when the share price was below the current price of US$36.70, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 14.5% of Theodore Schlein's holding.
In the last twelve months insiders netted US$1.3m for 46730 shares sold. Insiders in Chegg didn't buy any shares in the last year. 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!
I will like Chegg better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insider Ownership of Chegg
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. It's great to see that Chegg insiders own 4.1% of the company, worth about US$179m. 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 Do The Chegg Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Chegg shares in the last quarter. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of Chegg insider transactions don't fill us with confidence. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
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.