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 Trupanion, Inc. (NASDAQ:TRUP).
What Is Insider Selling?
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 it is perfectly logical to keep tabs on what insiders are doing. 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 Trupanion
The Director & Consultant, Howard Rubin, made the biggest insider sale in the last 12 months. That single transaction was for US$1.2m worth of shares at a price of US$27.04 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$31.48. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 18% of Howard Rubin's holding. Howard Rubin was the only individual insider to sell shares in the last twelve months.
Happily, we note that in the last year insiders paid US$512k for 20000 shares. On the other hand they divested 85000 shares, for US$2.4m. Howard Rubin ditched 85000 shares over the year. The average price per share was US$28.41. 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Does Trupanion 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. We usually like to see fairly high levels of insider ownership. Insiders own 6.4% of Trupanion shares, worth about US$70m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Trupanion Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. We don't take much encouragement from the transactions by Trupanion insiders. The modest level of insider ownership is, at least, some comfort. Of course, the future is what matters most. So if you are interested in Trupanion, you should check out this free report on analyst forecasts for the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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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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.