Stock Analysis

Have Insiders Been Selling Webjet Limited (ASX:WEB) Shares?

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ASX:WEB
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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 we'll take a look at whether insiders have been buying or selling shares in Webjet Limited (ASX:WEB).

What Is Insider Buying?

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 logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.

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Webjet Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the MD & Executive Director, John Guscic, for AU$21m worth of shares, at about AU$3.98 per share. That means that even when the share price was below the current price of AU$4.82, an insider wanted to cash in some shares. 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. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. This single sale was 53% of John Guscic's stake.

Insiders in Webjet didn't buy any shares in the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
ASX:WEB Insider Trading Volume January 14th 2021

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company 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. Webjet insiders own about AU$63m worth of shares. That equates to 3.9% of the company. 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 Webjet Insider Transactions Indicate?

There haven't been any insider transactions in the last three months -- that doesn't mean much. Still, the insider transactions at Webjet in the last 12 months are not very heartening. The modest level of insider ownership is, at least, some comfort. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Case in point: We've spotted 2 warning signs for Webjet you should be aware of, and 1 of these makes us a bit uncomfortable.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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