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It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Papa John's International, Inc. (NASDAQ:PZZA).
Do Insider Transactions Matter?
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, such insiders must disclose their trading activities, and not trade on inside information.
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. 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 Papa John's International
The , John Schnatter, made the biggest insider sale in the last 12 months. That single transaction was for US$157m worth of shares at a price of US$45.63 each. That means that an insider was selling shares at below the current price (US$45.95). 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. It is worth noting that this sale was only 38.4% of John Schnatter's holding. The only individual insider seller over the last year was John Schnatter.
John Schnatter ditched 7.3m shares over the year. The average price per share was US$45.92. 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 are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at Papa John's International Have Sold Stock Recently
Over the last three months, we've seen notably more insider selling, than insider buying, at Papa John's International. In total, John Schnatter sold US$335m worth of shares in that time. Meanwhile Anthony Sanfilippo bought US$142k worth, as we said above. Generally this level of net selling might be considered a bit bearish.
Insider Ownership of Papa John's International
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Papa John's International insiders own about US$279m worth of shares (which is 19% of the company). 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 Papa John's International Tell Us?
The stark truth for Papa John's International is that there has been more insider selling than insider buying in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. It is good to see high insider ownership, but the insider selling leaves us cautious. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Papa John's International.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
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.