Possible Bearish Signals With TransAlta Insiders Disposing Stock

TransAlta Corporation (TSE:TA) shareholders might have a reason to worry after multiple insiders sold their shares over the last year. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for TransAlta

TransAlta Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the insider, Kerry O'Reilly, sold CA$537k worth of shares at a price of CA$10.99 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of CA$20.36. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 23% of Kerry O'Reilly's holding.

In the last twelve months insiders purchased 7.38k shares for CA$68k. But they sold 206.88k shares for CA$2.5m. In total, TransAlta 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. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

I will like TransAlta 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 TransAlta Have Sold Stock Recently

The last three months saw significant insider selling at TransAlta. In total, Executive VP of People & Culture and Chief Administrative Officer Jane Fedoretz dumped CA$1.1m 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 TransAlta

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. Insiders own 0.4% of TransAlta shares, worth about CA$22m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Does This Data Suggest About TransAlta Insiders?

An insider sold TransAlta shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. Insiders own shares, but we're still pretty cautious, given the history of sales. We're in no rush to buy! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 4 warning signs for TransAlta you should be aware of, and 2 of these make us uncomfortable.

Of course TransAlta 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.