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 Rocky Mountain Chocolate Factory, Inc. (NASDAQ:RMCF), 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.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. 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.’
Rocky Mountain Chocolate Factory Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when COO, CFO Bryan Merryman sold US$245k worth of shares at a price of US$12.33 per share. While the sale doesn’t make us feel confident, we do note it was conducted at a price well above the current share price, which is US$8.45. So it is hard to draw any strong conclusion from it.
Over the last year, we note insiders sold 64.56k shares worth US$761k. In total, Rocky Mountain Chocolate Factory insiders sold more than they bought over the last year. The sellers received a price of around US$11.78, on average. It is certainly not great to see that insiders have sold shares in the company. However, we do note that the average sale price was significantly higher than the current share price (which is US$8.45). You can see a visual depiction of insider transactions 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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insider Ownership of Rocky Mountain Chocolate Factory
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. Rocky Mountain Chocolate Factory insiders own about US$5.4m worth of shares (which is 11% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About Rocky Mountain Chocolate Factory Insiders?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. We don’t take much encouragement from the transactions by Rocky Mountain Chocolate Factory insiders. And usually insiders own more stock in the company, according to our data. I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .
But note: Rocky Mountain Chocolate Factory 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.