We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell Stepan Company (NYSE:SCL), you may well want to know whether insiders have been buying or selling.
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, 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 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.’
Stepan Insider Transactions Over The Last Year
Director F. Stepan made the biggest insider sale in the last 12 months. That single transaction was for US$301k worth of shares at a price of US$87.59 each. That means that an insider was selling shares at below the current price (US$89.03). While their view may have changed since they sold, this isn’t a particularly bullish sign. As a general rule we consider it to be discouraging when insiders are selling below the current price. Please note, however, that this single sale was just 0.4% of F. Stepan’s stake.
In total, Stepan insiders sold more than they bought over the last year. The average sell price was around US$87.63. It’s not particularly great to see insiders were selling shares at below recent prices. Of course, the sales could be motivated for a multitude of reasons, so we shouldn’t jump to conclusions. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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Stepan Insiders Are Selling The Stock
Over the last three months, we’ve seen notably more insider selling, than insider buying, at Stepan. We note Scott Behrens cashed in US$182k worth of shares. On the other hand we note VP & CFO Luis Rojo bought US$27k worth of shares. Generally this level of net selling might be considered a bit bearish.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Stepan insiders own about US$191m worth of shares (which is 9.5% of the company). 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 Does This Data Suggest About Stepan Insiders?
The insider sales have outweighed the insider buying, at Stepan, in the last three months. Zooming out, the longer term picture doesn’t give us much comfort. But it is good to see that Stepan is growing earnings. 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.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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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.