Possible Bearish Signals With Dollarama Insiders Disposing Stock

Many Dollarama Inc. (TSE:DOL) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. 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.

View our latest analysis for Dollarama

The Last 12 Months Of Insider Transactions At Dollarama

Over the last year, we can see that the biggest insider sale was by the Founder & Chairman Emeritus, Laurence Rossy, for CA$28m worth of shares, at about CA$124 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of CA$150. 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. We note that the biggest single sale was only 13% of Laurence Rossy's holding.

Dollarama insiders didn't buy any shares over the last year. 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!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Does Dollarama Boast High Insider Ownership?

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Dollarama insiders own about CA$606m worth of shares (which is 1.5% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Dollarama Tell Us?

It doesn't really mean much that no insider has traded Dollarama shares in the last quarter. While we feel good about high insider ownership of Dollarama, we can't say the same about the selling of shares. While it's good to be aware of 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. While conducting our analysis, we found that Dollarama has 1 warning sign and it would be unwise to ignore this.

Of course Dollarama 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 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.