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 Community West Bancshares (NASDAQ:CWBC).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. 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'.
Community West Bancshares Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Chairman of the Board, William Peeples, sold US$330k worth of shares at a price of US$12.30 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$10.00. So it is hard to draw any strong conclusion from it.
Happily, we note that in the last year insiders paid US$283k for 24652 shares. On the other hand they divested 84335 shares, for US$947k. In total, Community West Bancshares insiders sold more than they bought over the last year. 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!
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).
Community West Bancshares Insiders Are Selling The Stock
Over the last three months, we've seen notably more insider selling, than insider buying, at Community West Bancshares. In total, William Peeples sold US$207k worth of shares in that time. On the flip side, insiders spent US$18k on purchasing shares. Because the selling vastly outweighs the buying, we'd say this is a somewhat bearish sign.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Community West Bancshares insiders own 25% of the company, worth about US$21m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Do The Community West Bancshares Insider Transactions Indicate?
The insider sales have outweighed the insider buying, at Community West Bancshares, in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But since Community West Bancshares is profitable and growing, we're not too worried by this. While insiders do own shares, they don't own a heap, and they have been selling. We're in no rush to buy! I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
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 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.