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Read This Before Buying Provident Financial Holdings, Inc. (NASDAQ:PROV) Shares

Declan Brown

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 shareholders might well want to know whether insiders have been buying or selling shares in Provident Financial Holdings, Inc. (NASDAQ:PROV).

Do Insider Transactions Matter?

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 logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Colombia 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’.

Check out our latest analysis for Provident Financial Holdings

The Last 12 Months Of Insider Transactions At Provident Financial Holdings

In the last twelve months, the biggest single sale by an insider was when David Weiant sold US$54k worth of shares at a price of US$18.06 per share. So we know that an insider sold shares at around the present share price of US$15.27. 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. David Weiant was the only individual insider to sell over the last year.

David Weiant sold a total of 5.00k shares over the year at an average price of US$17.79. You can see a visual depiction of insider transactions over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

NasdaqGS:PROV Insider Trading December 24th 18

I will like Provident Financial Holdings better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Does Provident Financial Holdings Boast High Insider Ownership?

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. It’s great to see that Provident Financial Holdings insiders own 9.8% of the company, worth about US$11m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The Provident Financial Holdings Insider Transactions Indicate?

Our data shows a little more insider selling than buying in the last three months. But the net divestment is not enough to concern us at all. Recent insider selling makes us a little nervous, in light of the broader picture of Provident Financial Holdings insider transactions. But it’s good to see that insiders own shares in the company. 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 Provident Financial Holdings 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 editorial-team@simplywallst.com.