Are Insiders Selling Kip McGrath Education Centres Limited (ASX:KME) Stock?

By
Simply Wall St
Published
March 09, 2021
ASX:KME
Source: Shutterstock

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 shareholders might well want to know whether insiders have been buying or selling shares in Kip McGrath Education Centres Limited (ASX:KME).

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.

Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. 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'.

View our latest analysis for Kip McGrath Education Centres

The Last 12 Months Of Insider Transactions At Kip McGrath Education Centres

Over the last year, we can see that the biggest insider sale was by the insider, Kip McGrath, for AU$2.9m worth of shares, at about AU$1.00 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of AU$1.49. 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 24% of Kip McGrath's holding.

Over the last year, we can see that insiders have bought 150.47k shares worth AU$149k. But they sold 4.11m shares for AU$4.2m. All up, insiders sold more shares in Kip McGrath Education Centres than they bought, over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
ASX:KME Insider Trading Volume March 9th 2021

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).

Does Kip McGrath Education Centres 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. We usually like to see fairly high levels of insider ownership. Insiders own 28% of Kip McGrath Education Centres shares, worth about AU$22m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

So What Does This Data Suggest About Kip McGrath Education Centres Insiders?

The fact that there have been no Kip McGrath Education Centres insider transactions recently certainly doesn't bother us. We don't take much encouragement from the transactions by Kip McGrath Education Centres insiders. But it's good to see that insiders own shares in the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Kip McGrath Education Centres. At Simply Wall St, we found 4 warning signs for Kip McGrath Education Centres that deserve your attention before buying any shares.

Of course Kip McGrath Education Centres may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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