It is not uncommon to see companies perform well in the years after insiders buy shares. 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 we’ll take a look at whether insiders have been buying or selling shares in DIRTT Environmental Solutions Ltd. (TSE:DRT).
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 it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
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The Last 12 Months Of Insider Transactions At DIRTT Environmental Solutions
Over the last year, we can see that the biggest insider sale was by Co-Founder & VP of Product Development Geoff Gosling for CA$1.6m worth of shares, at about CA$7.00 per share. So what is clear is that an insider saw fit to sell at around the current price of CA$5.99. While their view may have changed since the sale, this is not a particularly positive fact. 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 17.60k shares for CA$113k. But they sold 1.36m for CA$8.9m. Over the last year we saw more insider selling of DIRTT Environmental Solutions shares, than buying. They sold for an average price of about CA$6.56. It’s not particularly great to see insiders were selling shares around current prices. But we don’t put too much weight on the insider selling, since sellers could have personal reasons. 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!
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Insiders at DIRTT Environmental Solutions Have Sold Stock Recently
The last quarter saw substantial insider selling of DIRTT Environmental Solutions shares. In total, insiders sold CA$2.3m worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the directors think that the shares are a bargain.
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 1.8% of DIRTT Environmental Solutions shares, worth about CA$9.1m, according to our data. Overall, this level of ownership isn’t that impressive, but it’s certainly better than nothing!
So What Do The DIRTT Environmental Solutions Insider Transactions Indicate?
Insiders haven’t bought DIRTT Environmental Solutions stock in the last three months, but there was some selling. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. When you combine this with the relatively low insider ownership, we are very cautious about the stock. We’d certainly think twice before buying! 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.
Of course DIRTT Environmental Solutions may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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 firstname.lastname@example.org.