Insiders at Franco-Nevada Corporation (TSE:FNV) sold US$1.6m worth of stock, a potential red flag that needs to be monitored

Despite a 4.2% gain in Franco-Nevada Corporation's (TSE:FNV) stock price this week, shareholders shouldn't let up. In spite of the relatively cheap prices, insiders made the decision to sell US$1.6m worth of stock in the last 12 months. This could be a warning indicator of vulnerabilities in the future.

Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.

See our latest analysis for Franco-Nevada

Franco-Nevada Insider Transactions Over The Last Year

The Non-Executive Chair, David Harquail, made the biggest insider sale in the last 12 months. That single transaction was for CA$922k worth of shares at a price of CA$184 each. So it's clear an insider wanted to take some cash off the table, even below the current price of CA$189. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent 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. It is worth noting that this sale was only 0.5% of David Harquail's holding.

In total, Franco-Nevada insiders sold more than they bought over 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!

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).

Insiders at Franco-Nevada Have Sold Stock Recently

The last three months saw significant insider selling at Franco-Nevada. In total, Chief Legal Officer & Corporate Secretary Lloyd Hong sold CA$643k 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.

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. Franco-Nevada insiders own 0.7% of the company, currently worth about CA$259m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Does This Data Suggest About Franco-Nevada Insiders?

An insider sold Franco-Nevada shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. On the plus side, Franco-Nevada makes money, and is growing profits. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Franco-Nevada. At Simply Wall St, we found 1 warning sign for Franco-Nevada that deserve your attention before buying any shares.

Of course Franco-Nevada 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. 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.