It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we’ll take a look at whether insiders have been buying or selling shares in Dollarama Inc. (TSE:DOL).
What Is Insider Buying?
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 equally, we would consider it foolish to ignore insider transactions altogether. 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 Dollarama
Senior Vice President of Import Division Geoffrey Robillard made the biggest insider sale in the last 12 months. That single transaction was for CA$8.7m worth of shares at a price of CA$31.17 each. That means that even when the share price was below the current price of CA$35.62, an insider wanted to cash in some shares. While their view may have changed since they sold, this isn’t a particularly bullish sign. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. We note that the biggest single sale was only 15.7% of Geoffrey Robillard’s holding.
All up, insiders sold more shares in Dollarama than they bought, over the last year. The average sell price was around CA$38.91. We don’t gain much confidence from insider selling near the recent share price. Since insiders sell for many reasons, we wouldn’t put too much weight on it. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Dollarama Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Dollarama shares. In total, Geoffrey Robillard sold CA$8.7m 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.
Insider Ownership of Dollarama
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 Dollarama insiders own 4.0% of the company, worth about CA$444m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Dollarama Tell Us?
An insider hasn’t bought Dollarama stock in the last three months, but there was some selling. Zooming out, the longer term picture doesn’t give us much comfort. On the plus side, Dollarama makes money, and is growing profits. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn’t make us feel confident about the company. 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.
But note: Dollarama 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.
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.