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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 The Gorman-Rupp Company (NYSE:GRC), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Gorman-Rupp Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by VP, Treasurer & Assistant Secretary Ronald Pittenger for US$184k worth of shares, at about US$37.13 per share. So we know that an insider sold shares at around the present share price of US$34.13. They might be selling for a variety of reasons, but it's hard to argue this is a bullish sign. We generally tread carefully if insiders have been selling on market, even if they sold slightly above the current price.
We note that in the last year insiders divested 10.47k shares for a total of US$374k. In total, Gorman-Rupp insiders sold more than they bought over the last year. The average sell price was around US$35.71. It's not ideal to see that insiders have sold at around the current price. While some insiders have decided to take some money off the table, we wouldn't put too much weight on this fact. You can see the insider transactions (by individuals) over the last year depicted in the chart 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 alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Gorman-Rupp Insiders Are Selling The Stock
The last three months saw significant insider selling at Gorman-Rupp. In total, Independent Director Christopher Lake sold US$66k 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 Gorman-Rupp
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. Gorman-Rupp insiders own 33% of the company, currently worth about US$292m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At Gorman-Rupp Tell Us?
An insider hasn't bought Gorman-Rupp stock in the last three months, but there was some selling. And there weren't any purchases to give us comfort, over the last year. On the plus side, Gorman-Rupp 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. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Gorman-Rupp.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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 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.