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It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So shareholders might well want to know whether insiders have been buying or selling shares in Paycom Software, Inc. (NYSE:PAYC).
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 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.'
Paycom Software Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Director, Robert Levenson, sold US$1.3m worth of shares at a price of US$145 per share. That means that an insider was selling shares at slightly below the current price (US$205). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 10.2% of Robert Levenson's stake.
Over the last year, we note insiders sold 15745 shares worth US$2.2m. In the last year Paycom Software insiders didn't buy any company stock. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like Paycom Software 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 Paycom Software Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Paycom Software insiders own 9.6% of the company, currently worth about US$1.1b 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 Does This Data Suggest About Paycom Software Insiders?
It doesn't really mean much that no insider has traded Paycom Software shares in the last quarter. It's great to see high levels of insider ownership, but looking back at the last year, we don't gain confidence from the Paycom Software insiders selling. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Paycom Software.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.