It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Addus HomeCare Corporation (NASDAQ:ADUS).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. 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. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Addus HomeCare Insider Transactions Over The Last Year
The CFO, Executive VP, Brian Poff, made the biggest insider sale in the last 12 months. That single transaction was for US$369k worth of shares at a price of US$73.76 each. That means that even when the share price was below the current price of US$78.75, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 22% of Brian Poff's holding.
We note that in the last year insiders divested 7785 shares for a total of US$554k. In the last year Addus HomeCare insiders didn't buy any company stock. 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 like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insider Ownership of Addus HomeCare
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Addus HomeCare insiders own about US$18m worth of shares. That equates to 1.8% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Addus HomeCare Tell Us?
It doesn't really mean much that no insider has traded Addus HomeCare shares in the last quarter. We don't take much encouragement from the transactions by Addus HomeCare insiders. But it's good to see that insiders own shares in the company. Of course, the future is what matters most. So if you are interested in Addus HomeCare, you should check out this free report on analyst forecasts for the company.
Of course Addus HomeCare may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.