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Should You Be Worried About Insider Transactions At CorVel Corporation (NASDAQ:CRVL)?

Simply Wall St

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell CorVel Corporation (NASDAQ:CRVL), you may well want to know whether insiders have been buying or selling.

Do Insider Transactions Matter?

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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'

See our latest analysis for CorVel

CorVel Insider Transactions Over The Last Year

Notably, that recent sale by Chairman & COO Victor Clemons was not the only time they sold CorVel shares this year. They previously made an even bigger sale of -US$458.7k worth of shares at a price of US$82.94 per share. So we know that an insider sold shares at around the present share price of US$79.51. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern.

In the last twelve months insiders netted US$4.5m for 58548 shares sold. In the last year CorVel insiders didn't buy any company stock. You can see the insider transactions (by individuals) 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!

NasdaqGS:CRVL Recent Insider Trading, September 15th 2019

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).

CorVel Insiders Are Selling The Stock

The last three months saw significant insider selling at CorVel. In total, insiders dumped US$2.0m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Insider Ownership of CorVel

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. CorVel insiders own about US$181m worth of shares (which is 12% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At CorVel Tell Us?

Insiders sold CorVel shares recently, but they didn't buy any. And there weren't any purchases to give us comfort, over the last year. But it is good to see that CorVel is growing earnings. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. To put this in context, take a look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .

But note: CorVel 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.

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 editorial-team@simplywallst.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.