Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
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 shareholders might well want to know whether insiders have been buying or selling shares in Trupanion, Inc. (NASDAQ:TRUP).
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, most countries require that the company discloses such transactions to the market.
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.’
Trupanion Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when Director & Consultant Howard Rubin sold US$1.2m worth of shares at a price of US$27.04 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$27.89. While sellers have a variety of reasons for selling, this isn’t particularly great to see. As a general rule we consider it to be discouraging when insiders are selling below the current price. It is worth noting that this sale was only 17.9% of Howard Rubin’s holding.
Over the last year, we can see that insiders have bought 20.00k shares worth US$512k. But they sold 51.00k for US$1.4m. In total, Trupanion insiders sold more than they bought over the last year. The sellers received a price of around US$27.16, on average. We don’t gain confidence from insider selling below the recent share price. 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 click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Trupanion Insiders Are Selling The Stock
Over the last three months, we’ve seen notably more insider selling, than insider buying, at Trupanion. In total, Howard Rubin sold US$1.2m worth of shares in that time. Meanwhile insiders bought US$512k worth, as we said above. Since the selling really does outweigh the buying, we’d say that these transactions may suggest that some insiders feel the shares are not cheap.
Insider Ownership of Trupanion
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 6.8% of Trupanion shares, worth about US$62m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At Trupanion Tell Us?
The stark truth for Trupanion is that there has been more insider selling than insider buying in the last three months. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. So we’d only buy after careful consideration. Of course, the future is what matters most. So if you are interested in Trupanion, you should check out this free report on analyst forecasts for the company.
But note: Trupanion 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 email@example.com.