Don't Ignore The Insider Selling In Kip McGrath Education Centres

Anyone interested in Kip McGrath Education Centres Limited (ASX:KME) should probably be aware that a company insider, Kip McGrath, recently divested AU$402k worth of shares in the company, at an average price of AU$0.40 each. That sale was 14% of their holding, so it does make us raise an eyebrow.

Check out our latest analysis for Kip McGrath Education Centres

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

Notably, that recent sale by Kip McGrath is the biggest insider sale of Kip McGrath Education Centres shares that we've seen in the last year. So it's clear an insider wanted to take some cash off the table, even below the current price of AU$0.42. 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 14% of Kip McGrath's holding.

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!

I will like Kip McGrath Education Centres better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.

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. 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 27% of Kip McGrath Education Centres shares, worth about AU$6.5m. 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 Do The Kip McGrath Education Centres Insider Transactions Indicate?

Unfortunately, there has been more insider selling of Kip McGrath Education Centres stock, than buying, in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. While insiders do own shares, they don't own a heap, and they have been selling. We're in no rush to buy! So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. For instance, we've identified 4 warning signs for Kip McGrath Education Centres (1 is a bit concerning) you should be aware of.

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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.