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Should You Be Worried About Insider Transactions At Pegasystems Inc. (NASDAQ:PEGA)?

Alex Johannesen

We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So we’ll take a look at whether insiders have been buying or selling shares in Pegasystems Inc. (NASDAQ:PEGA).

What Is Insider Buying?

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.

Insider transactions are not the most important thing when it comes to long-term investing. 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’.

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Pegasystems Insider Transactions Over The Last Year

Steven Kaplan made the biggest insider sale in the last 12 months. That single transaction was for US$652k worth of shares at a price of US$65.16 each. While the sale doesn’t make us feel confident, we do note it was conducted at a price well above the current share price, which is US$51.78. So it is hard to draw any strong conclusion from it.

We note that in the last year insiders divested 54.82k shares for a total of US$3.4m. All up, insiders sold more shares in Pegasystems than they bought, over the last year. The sellers received a price of around US$62.34, on average. Insider selling doesn’t make us excited to buy. But we note that the selling, on average, was at well above the recently traded price of US$51.78. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

NasdaqGS:PEGA Insider Trading January 11th 19

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Insiders at Pegasystems Have Sold Stock Recently

Over the last three months, we’ve seen significant insider selling at Pegasystems. In total, insiders sold US$196k 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 of Pegasystems

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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Pegasystems insiders own about US$2.0b worth of shares (which is 52% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Does This Data Suggest About Pegasystems Insiders?

Insiders sold Pegasystems shares recently, but they didn’t buy any. And even if we look to the last year, we didn’t see any purchases. It is good to see high insider ownership, but the insider selling leaves us cautious. Of course, the future is what matters most. So if you are interested in Pegasystems, you should check out this free report on analyst forecasts for the company.

But note: Pegasystems 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.