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Should You Be Worried About Insider Transactions At Eversource Energy (NYSE:ES)?

Simply Wall St

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 Eversource Energy (NYSE:ES).

Do Insider Transactions Matter?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, most countries require that the company discloses such transactions to the market.

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. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.

View our latest analysis for Eversource Energy

Eversource Energy Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by Chairman James Judge for US$5.5m worth of shares, at about US$69.50 per share. So what is clear is that an insider saw fit to sell at around the current price of US$68.97. They could have a variety of motivations for selling, but it’s still not particularly encouraging to see. We usually pause to reflect on the potential that a stock has a high valuation, if insiders have been selling at around the current price.

In the last twelve months insiders netted US$12m for 186.47k shares sold. All up, insiders sold more shares in Eversource Energy than they bought, over the last year. The sellers received a price of around US$65.79, on average. We don’t gain much confidence from insider selling near the recent share price. Since insiders sell for many reasons, we wouldn’t put too much weight on it. 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!

NYSE:ES Recent Insider Trading, March 5th 2019

I will like Eversource Energy better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Eversource Energy Insiders Are Selling The Stock

The last quarter saw substantial insider selling of Eversource Energy shares. In total, insiders dumped US$7.5m 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 directors think that the shares are a bargain.

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. Insiders own 0.3% of Eversource Energy shares, worth about US$55m. 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 Eversource Energy Insider Transactions Indicate?

Insiders haven’t bought Eversource Energy stock in the last three months, but there was some selling. And there weren’t any purchases to give us comfort, over the last year. But it is good to see that Eversource Energy is growing earnings. Insiders own shares, but we’re still pretty cautious, given the history of sales. So we’d only buy after careful consideration. 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.

Of course Eversource Energy may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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.