It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Ecolab Inc. (NYSE:ECL).
What Is Insider Selling?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. 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. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
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The Last 12 Months Of Insider Transactions At Ecolab
Executive VP & CTO Larry Berger made the biggest insider sale in the last 12 months. That single transaction was for US$1.4m worth of shares at a price of US$154 each. That means that an insider was selling shares at around the current price of US$149. 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.
Happily, we note that in the last year insiders paid US$933k for 6.90k shares. On the other hand they divested 19.60k shares, for US$3.0m. All up, insiders sold more shares in Ecolab than they bought, over the last year. The sellers received a price of around US$155, on average. It’s not too encouraging to see that insiders have sold at below the current price. But we wouldn’t put too much weight on the insider selling. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
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Ecolab Insiders Are Selling The Stock
The last three months saw significant insider selling at Ecolab. In total, Independent Director Leslie Biller sold US$451k worth of shares in that time, and we didn’t record any purchases whatsoever. Overall this makes us a bit cautious, but it’s not the be all and end all.
Does Ecolab 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. We usually like to see fairly high levels of insider ownership. Ecolab insiders own about US$208m worth of shares (which is 0.5% 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 Ecolab Insiders?
An insider sold stock recently, but they haven’t been buying. And our longer term analysis of insider transactions didn’t bring confidence, either. But since Ecolab is profitable and growing, we’re not too worried by this. The company boasts high insider ownership, but we’re a little hesitant, given the history of share sales. 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.
But note: Ecolab 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.