Should You Be Worried About Insider Transactions At Meritage Homes Corporation (NYSE:MTH)?
We often see insiders buying up shares in companies that perform well over the long term. 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 Meritage Homes Corporation (NYSE:MTH), you may well want to know whether insiders have been buying or selling.
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 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.’
View our latest analysis for Meritage Homes
The Last 12 Months Of Insider Transactions At Meritage Homes
Over the last year, we can see that the biggest insider sale was by Lead Independent Director Peter Ax for US$550k worth of shares, at about US$44.02 per share. That means that an insider was selling shares at around the current price of US$42.11. They might be selling for a variety of reasons, but it’s hard to argue this is a bullish sign. Arguably, insider selling at around current prices should give us reason to reflect on whether the stock is fully valued at the moment.
Over the last year we saw more insider selling of Meritage Homes shares, than buying. The average sell price was around US$44.89. We don’t gain confidence from insider selling below the recent share price. Of course, the sales could be motivated for a multitude of reasons, so we shouldn’t jump to conclusions. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Meritage Homes is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Meritage Homes Insiders Bought Stock Recently
It’s good to see that Meritage Homes insiders have made notable investments in the company’s shares. Specifically, Dana Bradford bought US$379k worth of shares in that time, and we didn’t record any sales whatsoever. That shows some optimism about the company’s future.
Does Meritage Homes Boast High Insider Ownership?
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. It appears that Meritage Homes insiders own 5.7% of the company, worth about US$88m. 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 Meritage Homes Insider Transactions Indicate?
It’s certainly positive to see the recent insider purchase. But we can’t say the same for the transactions over the last 12 months. We don’t take much heart from transactions by Meritage Homes insiders over the last year. But they own a reasonable amount of the company, and there was some buying recently. So they seem pretty well aligned, overall. Of course, the future is what matters most. So if you are interested in Meritage Homes, you should check out this free report on analyst forecasts for the company.
But note: Meritage Homes 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
