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 Extreme Networks, Inc. (NASDAQ:EXTR).
What Is Insider Selling?
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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.
Extreme Networks Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the President, Edward Meyercord, for US$822k worth of shares, at about US$8.22 per share. So what is clear is that an insider saw fit to sell at around the current price of US$7.31. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern. The only individual insider seller over the last year was Edward Meyercord.
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.
Extreme Networks Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at Extreme Networks. Specifically, President Edward Meyercord ditched US$822k 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 Extreme Networks
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 1.9% of Extreme Networks shares, worth about US$16m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Extreme Networks Insider Transactions Indicate?
An insider hasn't bought Extreme Networks stock in the last three months, but there was some selling. And even if we look to the last year, we didn't see any purchases. While insiders do own shares, they don't own a heap, and they have been selling. We'd think twice before buying! Of course, the future is what matters most. So if you are interested in Extreme Networks, you should check out this free report on analyst forecasts for the company.
But note: Extreme Networks 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.
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