We often see insiders buying up shares in companies that perform well over the long term. 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 we’ll take a look at whether insiders have been buying or selling shares in Diversified Restaurant Holdings, Inc. (NASDAQ:SAUC).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 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.’
The Last 12 Months Of Insider Transactions At Diversified Restaurant Holdings
Executive Chairman of the Board Thomas Ansley made the biggest insider sale in the last 12 months. That single transaction was for US$700k worth of shares at a price of US$1.00 each. So we know that an insider sold shares at around the present share price of US$0.90. They might be selling for a variety of reasons, but it’s hard to argue this is a bullish sign. We usually pause to reflect on the potential that a stock has a high valuation, if insiders have been selling at around the current price.
In the last twelve months insiders purchased 115.00k shares for US$115k. On the other hand they divested 709.45k shares, for US$709k. All up, insiders sold more shares in Diversified Restaurant Holdings than they bought, over the last year. They sold for an average price of about US$1.00. 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. By clicking on the graph below, you can see the precise details of each insider transaction!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Does Diversified Restaurant Holdings Boast High Insider Ownership?
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. It’s great to see that Diversified Restaurant Holdings insiders own 41% of the company, worth about US$12m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Does This Data Suggest About Diversified Restaurant Holdings Insiders?
The fact that there have been no Diversified Restaurant Holdings insider transactions recently certainly doesn’t bother us. It’s heartening that insiders own plenty of stock, but we’d like to see more insider buying, since the last year of Diversified Restaurant Holdings insider transactions don’t fill us with confidence. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Diversified Restaurant Holdings.
But note: Diversified Restaurant Holdings 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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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.