We often see insiders buying up shares in companies that perform well over the long term. 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 we'll take a look at whether insiders have been buying or selling shares in Recipe Unlimited Corporation (TSE:RECP).
Do Insider Transactions Matter?
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 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'.
The Last 12 Months Of Insider Transactions At Recipe Unlimited
The Vice Chairman, David Aisenstat, made the biggest insider sale in the last 12 months. That single transaction was for CA$673k worth of shares at a price of CA$17.11 each. So it's clear an insider wanted to take some cash off the table, even below the current price of CA$17.50. 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 51% of David Aisenstat's holding. The only individual insider seller over the last year was David Aisenstat.
David Aisenstat divested 70.00k shares over the last 12 months at an average price of CA$16.76. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like Recipe Unlimited better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Recipe Unlimited Insiders Are Selling The Stock
The last three months saw significant insider selling at Recipe Unlimited. Specifically, Vice Chairman David Aisenstat ditched CA$1.2m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Insider Ownership of Recipe Unlimited
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Based on our data, Recipe Unlimited insiders have about 0.3% of the stock, worth approximately CA$2.6m. However, it's possible that insiders might have an indirect interest through a more complex structure. I generally like to see higher levels of ownership.
What Might The Insider Transactions At Recipe Unlimited Tell Us?
An insider sold stock recently, but they haven't been buying. And even if we look at the last year, we didn't see any purchases. When you consider that most companies have higher levels of insider ownership, we're a little wary. So we'd only buy after very careful consideration. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For instance, we've identified 4 warning signs for Recipe Unlimited (2 are concerning) you should be aware of.
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.
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