It is not uncommon to see companies perform well in the years after insiders buy shares. 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 shareholders might well want to know whether insiders have been buying or selling shares in Domino’s Pizza, Inc. (NYSE:DPZ).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
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.
Domino’s Pizza Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Independent Director, James Goldman, sold US$696k worth of shares at a price of US$280 per share. That means that even when the share price was below the current price of US$292, an insider wanted to cash in some shares. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it’s only a weak signal. It is worth noting that this sale was only 32% of James Goldman’s holding.
Domino’s Pizza insiders didn’t buy any shares over the last year. 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!
I will like Domino’s Pizza better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Domino’s Pizza Insiders Are Selling The Stock
The last three months saw significant insider selling at Domino’s Pizza. In total, Independent Director C. Andrew Ballard sold US$407k worth of shares in that time, and we didn’t record any purchases whatsoever. Overall this makes us a bit cautious, but it’s not the be all and end all.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 0.7% of Domino’s Pizza shares, worth about US$78m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The Domino’s Pizza Insider Transactions Indicate?
An insider sold Domino’s Pizza shares recently, but they didn’t buy any. Looking to the last twelve months, our data doesn’t show any insider buying. But since Domino’s Pizza is profitable and growing, we’re not too worried by this. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. So we’d only buy after careful consideration. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Domino’s Pizza.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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