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 Proofpoint, Inc. (NASDAQ:PFPT).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At Proofpoint
The Executive VP and GM of Compliance & Digital Risk Business Unit, Robert Lee, made the biggest insider sale in the last 12 months. That single transaction was for US$652k worth of shares at a price of US$114 each. That means that an insider was selling shares at slightly below the current price (US$118). We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was 100% of Robert Lee's holding.
Over the last year, we note insiders sold 10697 shares worth US$1.2m. Proofpoint insiders didn't buy any shares over the last year. 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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at Proofpoint Have Sold Stock Recently
The last three months saw significant insider selling at Proofpoint. Specifically, Robert Lee ditched US$210k 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.
Insider Ownership of Proofpoint
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Proofpoint insiders own 1.6% of the company, worth about US$103m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Proofpoint Tell Us?
An insider sold Proofpoint shares recently, but they didn't buy any. And even if we look to the last year, we didn't see any purchases. It is good to see high insider ownership, but the insider selling leaves us cautious. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Proofpoint.
But note: Proofpoint 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.
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 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.