Insiders At FirstService Sold US$159m In Stock, Alluding To Potential Weakness

In the last year, many FirstService Corporation (TSE:FSV) 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, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

See our latest analysis for FirstService

FirstService Insider Transactions Over The Last Year

The Founder & Independent Chairman of the Board, Jay Hennick, made the biggest insider sale in the last 12 months. That single transaction was for CA$57m worth of shares at a price of CA$238 each. That means that even when the share price was below the current price of CA$270, an insider wanted to cash in some shares. 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. 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 just 7.9% of Jay Hennick's stake.

Over the last year, we can see that insiders have bought 45.00k shares worth CA$5.9m. On the other hand they divested 671.43k shares, for CA$159m. All up, insiders sold more shares in FirstService than they bought, over the last year. The average sell price was around US$237. We don't gain confidence from insider selling below the recent share price. Since insiders sell for many reasons, we wouldn't put too much weight on it. 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 FirstService 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.

Insiders At FirstService Have Sold Stock Recently

The last three months saw significant insider selling at FirstService. In total, insiders dumped CA$51m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Insider Ownership Of FirstService

Many investors like to check how much of a company is owned by 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. FirstService insiders own 7.3% of the company, currently worth about CA$885m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Do The FirstService Insider Transactions Indicate?

Insiders sold stock recently, but they haven't been buying. And our longer term analysis of insider transactions didn't bring confidence, either. 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. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Every company has risks, and we've spotted 2 warning signs for FirstService you should know about.

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 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.