Insiders probably made the right decision selling CA$814k worth of shares earlier this year as Enghouse Systems Limited's (TSE:ENGH)) stock dips by 8.5%.

By
Simply Wall St
Published
May 11, 2022
TSX:ENGH
Source: Shutterstock

Insiders at Enghouse Systems Limited (TSE:ENGH) sold CA$814k worth of stock at an average price of CA$40.68 a share over the past year, making the most of their investment. After the stock price dropped 8.5% last week, the company's market value declined by CA$167m, but insiders were able to mitigate their losses.

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 Enghouse Systems

Enghouse Systems Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the Independent Director, Reid Drury, sold CA$814k worth of shares at a price of CA$40.68 per share. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. The silver lining is that this sell-down took place above the latest price (CA$32.34). So it may not shed much light on insider confidence at current levels. Reid Drury was the only individual insider to sell over the last year.

In the last twelve months insiders purchased 2.20k shares for CA$97k. But they sold 20.00k shares for CA$814k. 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!

insider-trading-volume
TSX:ENGH Insider Trading Volume May 11th 2022

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).

Enghouse Systems Insiders Are Selling The Stock

The last three months saw significant insider selling at Enghouse Systems. In total, Independent Director Reid Drury sold CA$814k 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 of Enghouse Systems

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. We usually like to see fairly high levels of insider ownership. It's great to see that Enghouse Systems insiders own 19% of the company, worth about CA$338m. 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 Enghouse Systems Insider Transactions Indicate?

An insider sold stock recently, but they haven't been buying. Zooming out, the longer term picture doesn't give us much comfort. 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. You'd be interested to know, that we found 2 warning signs for Enghouse Systems and we suggest you have a look.

Of course Enghouse Systems 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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