Possible Bearish Signals With REA Group Insiders Disposing Stock

In the last year, many REA Group Limited (ASX:REA) insiders sold a substantial stake in the company which may have sparked shareholders' attention. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for REA Group

The Last 12 Months Of Insider Transactions At REA Group

Notably, that recent sale by CEO & Executive Director Owen Wilson was not the only time they sold REA Group shares this year. Earlier in the year, they fetched AU$248 per share in a -AU$3.6m sale. That means that an insider was selling shares at around the current price of AU$236. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. In this case, the big sale took place at around the current price, so it's not too bad (but it's still not a positive).

REA Group insiders didn't buy any shares over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

For those who like to find hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.

Insiders At REA Group Have Sold Stock Recently

The last quarter saw substantial insider selling of REA Group shares. Specifically, CEO & Executive Director Owen Wilson ditched AU$3.0m 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.

Does REA Group Boast High Insider Ownership?

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. 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 0.4% of REA Group shares, worth about AU$119m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At REA Group Tell Us?

An insider sold stock recently, but they haven't been buying. Looking to the last twelve months, our data doesn't show any insider buying. On the plus side, REA Group makes money, and is growing profits. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 1 warning sign for REA Group you should be aware of.

Of course REA Group 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.