We often see insiders buying up shares in companies that perform well over the long term. 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 shareholders might well want to know whether insiders have been buying or selling shares in LHC Group, Inc. (NASDAQ:LHCG).
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, 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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At LHC Group
Over the last year, we can see that the biggest insider sale was by the Co-Founder, Keith Myers, for US$7.1m worth of shares, at about US$95.16 per share. That means that even when the share price was below the current price of US$122, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent 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. This single sale was just 5% of Keith Myers's stake.
Over the last year, we note insiders sold 160k shares worth US$17m. Insiders in LHC Group didn't buy any shares in the last year. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at LHC Group Have Sold Stock Recently
The last quarter saw substantial insider selling of LHC Group shares. In total, insiders dumped US$5.3m 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 LHC Group
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. LHC Group insiders own 5.8% of the company, currently worth about US$217m based on the recent share price. 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 Does This Data Suggest About LHC Group Insiders?
Insiders haven't bought LHC Group stock in the last three months, but there was some selling. And even if we look to the last year, we didn't see any purchases. But since LHC Group is profitable and growing, we're not too worried by this. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. 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: LHC Group 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.
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