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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 Pason Systems Inc. (TSE:PSI).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. 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.'
Pason Systems Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Chairman of the Board, James Hill, for CA$11m worth of shares, at about CA$22.13 per share. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The good news is that this large sale was at well above current price of CA$17.80. So it is hard to draw any strong conclusion from it. James Hill was the only individual insider to sell shares in the last twelve months.
Over the last year, we can see that insiders have bought 38001 shares worth CA$739k. But they sold 1.3m for CA$27m. James Hill divested 1.3m shares over the last 12 months at an average price of CA$20.21. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Pason Systems Insiders Are Selling The Stock
Over the last three months, we've seen notably more insider selling, than insider buying, at Pason Systems. We note James Hill cashed in CA$9.4m worth of shares. On the flip side, insiders spent CA$58k on purchasing shares. Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the company has been fully valued in recent months.
Does Pason Systems 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. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Pason Systems insiders own 11% of the company, worth about CA$163m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The Pason Systems Insider Transactions Indicate?
Unfortunately, there has been more insider selling of Pason Systems stock, than buying, in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. But it is good to see that Pason Systems is growing earnings. It is good to see high insider ownership, but the insider selling leaves us cautious. 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.
But note: Pason Systems 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 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.