We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell Eagle Materials Inc. (NYSE:EXP), you may well want to know whether insiders have been buying or selling.
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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.
The Last 12 Months Of Insider Transactions At Eagle Materials
Over the last year, we can see that the biggest insider sale was by the Director, Ed Bowman, for US$211k worth of shares, at about US$84.52 per share. That means that an insider was selling shares at slightly below the current price (US$94.00). 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. It is worth noting that this sale was only 15% of Ed Bowman's holding. Ed Bowman was the only individual insider to sell shares in the last twelve months.
Ed Bowman sold a total of 5083 shares over the year at an average price of US$77.81. The chart below shows insider transactions (by individuals) over the last year. 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).
Eagle Materials Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at Eagle Materials. In total, Director Ed Bowman sold US$211k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Insider Ownership of Eagle Materials
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 1.2% of Eagle Materials shares, worth about US$48m. 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 Does This Data Suggest About Eagle Materials Insiders?
An insider sold Eagle Materials shares recently, but they didn't buy any. And even if we look to the last year, we didn't see any purchases. Insiders own shares, but we're still pretty cautious, given the history of sales. We're in no rush to buy! Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Eagle Materials.
But note: Eagle Materials 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.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
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 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.