We often see insiders buying up shares in companies that perform well over the long term. 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 before you buy or sell Payment Data Systems, Inc. (NASDAQ:PYDS), 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 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. 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 Payment Data Systems
Over the last year, we can see that the biggest insider sale was by Co-Founder & Chairman Michael Long for US$61k worth of shares, at about US$1.76 per share. That means that an insider was selling shares at slightly below the current price (US$2.97). While sellers have a variety of reasons for selling, this isn’t particularly great to see. When an insider sells below the current price, it does tend to make us wonder about the current valuation. Please note, however, that this single sale was just 1.5% of Michael Long’s stake.
We note that in the last year insiders divested 183.88k shares for a total of US$344k. In total, Payment Data Systems insiders sold more than they bought over the last year. They sold for an average price of about US$1.87. It’s not ideal to see that insiders have sold at around the current price. Since insiders sell for many reasons, we wouldn’t put too much weight on it. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Payment Data Systems better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at Payment Data Systems Have Sold Stock Recently
The last quarter saw substantial insider selling of Payment Data Systems shares. In total, insiders dumped US$98k worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the directors think that the shares are a bargain.
Insider Ownership of Payment Data Systems
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Payment Data Systems insiders own 42% of the company, currently worth about US$21m 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.
So What Do The Payment Data Systems Insider Transactions Indicate?
Insiders sold Payment Data Systems shares recently, but they didn’t buy any. Looking to the last twelve months, our data doesn’t show any insider buying. It is good to see high insider ownership, but the insider selling leaves us cautious. 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: Payment Data Systems 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.
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