Possible Bearish Signals With FirstService Insiders Disposing Stock

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, if numerous insiders are selling, shareholders should investigate more.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

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FirstService Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the Founder & Independent Chairman of the Board, Jay Hennick, for CA$57m worth of shares, at about CA$238 per share. That means that even when the share price was slightly below the current price of CA$242, an insider wanted to cash in some shares. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 7.9% of Jay Hennick's holding.

FirstService insiders didn't buy any shares over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

See our latest analysis for FirstService

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Insiders At FirstService Have Sold Stock Recently

The last quarter saw substantial insider selling of FirstService shares. Specifically, Independent Director Joan Sproul ditched CA$311k 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.

Does FirstService Boast High Insider Ownership?

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with 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 about CA$720m worth of shares (which is 6.6% of the company). 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?

An insider sold FirstService shares recently, but they didn't buy any. And even if we look at the last year, we didn't see any purchases. On the plus side, FirstService makes money, and is growing profits. It is good to see high insider ownership, but the insider selling leaves us cautious. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing FirstService. At Simply Wall St, we found 1 warning sign for FirstService that deserve your attention before buying any shares.

But note: FirstService may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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.