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 before you buy or sell Kona Grill, Inc. (NASDAQ:KONA), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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.
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. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
The Last 12 Months Of Insider Transactions At Kona Grill
Over the last year, we can see that the biggest insider purchase was by Nanyan Zheng for US$4.7m worth of shares, at about US$1.78 per share. So it’s clear an insider wanted to buy, even at a higher price. It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. That purchase may suggest an expectation of positive returns over the long term.
In the last twelve months insiders paid US$5.6m for 3.14m shares purchased. In total, Kona Grill insiders bought more than they sold over the last year. Their average price was about US$1.78. I’d consider this a positive as it suggests insiders see value at around the current price, which is US$1.50. You can see the insider transactions over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Kona Grill insiders own 40% of the company, currently worth about US$8.1m based on the recent share price. 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 Kona Grill Insider Transactions Indicate?
The fact that there have been no Kona Grill insider transactions recently certainly doesn’t bother us. On a brighter note, the transactions over the last year are encouraging. Overall we don’t see anything to make us think Kona Grill insiders are doubting the company, and they do own shares. 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, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.