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Should You Be Worried About Insider Transactions At Parsley Energy, Inc. (NYSE:PE)?

Simply Wall St

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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 Parsley Energy, Inc. (NYSE:PE).

What Is Insider Selling?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.

We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'

View our latest analysis for Parsley Energy

The Last 12 Months Of Insider Transactions At Parsley Energy

The Founder & Executive Chairman, Bryan Sheffield, made the biggest insider sale in the last 12 months. That single transaction was for US$70m worth of shares at a price of US$28.15 each. While we don't usually like to see insider selling, it's more concerning if the sales take price at a lower price. The silver lining is that this sell-down took place above the latest price (US$17.99). So it is hard to draw any strong conclusion from it.

In the last twelve months insiders purchased 16178 shares for US$332k. On the other hand they divested 3.0m shares, for US$79m. Over the last year we saw more insider selling of Parsley Energy shares, than buying. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

NYSE:PE Recent Insider Trading, June 24th 2019

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Insiders at Parsley Energy Have Sold Stock Recently

Over the last three months, we've seen notably more insider selling, than insider buying, at Parsley Energy. In that time, Bryan Sheffield dumped US$2.0m worth of shares. On the flip side, Independent Director Jerry Windlinger spent US$35k on purchasing shares. Because the selling vastly outweighs the buying, we'd say this is a somewhat bearish sign.

Insider Ownership

Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Parsley Energy insiders own about US$231m worth of shares (which is 4.1% of the company). 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 Parsley Energy Insiders?

The insider sales have outweighed the insider buying, at Parsley Energy, in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But since Parsley Energy is profitable and growing, we're not too worried by this. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Parsley Energy.

But note: Parsley Energy 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 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.