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 MutualFirst Financial, Inc. (NASDAQ:MFSF).
Do Insider Transactions Matter?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. 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 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.’
The Last 12 Months Of Insider Transactions At MutualFirst Financial
Over the last year, we can see that the biggest insider sale was by the Director, Michael Marien, for US$117k worth of shares, at about US$30.90 per share. That means that an insider was selling shares at slightly below the current price (US$32.14). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it’s only a weak signal. It is worth noting that this sale was only 6.8% of Michael Marien’s holding.
Happily, we note that in the last year insiders paid US$342k for 38087 shares. On the other hand they divested 12711 shares, for US$408k. All up, insiders sold more shares in MutualFirst Financial than they bought, over the last year. They sold for an average price of about US$32.12. It’s not too encouraging to see that insiders have sold at below the current price. Of course, the sales could be motivated for a multitude of reasons, so we shouldn’t jump to conclusions. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
MutualFirst Financial Insiders Are Selling The Stock
There was substantially more insider selling, than buying, of MutualFirst Financial shares over the last three months. In total, insiders sold US$229k worth of shares in that time. On the other hand we note Christopher Caldwell bought US$28k worth of shares. Since the selling really does outweigh the buying, we’d say that these transactions may suggest that some insiders feel the shares are not cheap.
Many investors like to check how much of a company is owned by insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. It appears that MutualFirst Financial insiders own 12% of the company, worth about US$33m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At MutualFirst Financial Tell Us?
The stark truth for MutualFirst Financial is that there has been more insider selling than insider buying in the last three months. Zooming out, the longer term picture doesn’t give us much comfort. On the plus side, MutualFirst Financial makes money, and is growing profits. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. We’re in no rush to buy! Of course, the future is what matters most. So if you are interested in MutualFirst Financial, you should check out this free report on analyst forecasts for the company.
But note: MutualFirst Financial 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 email@example.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.