We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 The Providence Service Corporation (NASDAQ:PRSC), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We don’t think shareholders should simply follow insider transactions. 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.’
Providence Service Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by David Shackelton for US$139k worth of shares, at about US$69.33 per share. So it’s clear an insider wanted to take some cash off the table, even slightly below the current price of US$69.50. While their view may have changed since they sold, this isn’t a particularly bullish sign. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. Please note, however, that this single sale was just 11.7% of David Shackelton’s stake. The only individual insider seller over the last year was David Shackelton.
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!
I will like Providence Service better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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. Insiders own 1.6% of Providence Service shares, worth about US$14m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The Providence Service Insider Transactions Indicate?
The fact that there have been no Providence Service insider transactions recently certainly doesn’t bother us. Our analysis of Providence Service insider transactions leaves us cautious. But it’s good to see that insiders own shares in the company. 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.
Of course Providence Service may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.