Need To Know: Electrocomponents plc (LON:ECM) Insiders Have Been Selling Shares

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Electrocomponents plc (LON:ECM), you may well want to know whether insiders have been buying or selling.

What Is Insider Buying?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.

We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.

View our latest analysis for Electrocomponents

The Last 12 Months Of Insider Transactions At Electrocomponents

Over the last year, we can see that the biggest insider sale was by the insider, Karen Guerra, for UK£197k worth of shares, at about UK£7.94 per share. That means that even when the share price was below the current price of UK£9.87, 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. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was 100% of Karen Guerra's stake.

Over the last year, we can see that insiders have bought 20.00k shares worth UK£110k. On the other hand they divested 69.43k shares, for UK£506k. Over the last year we saw more insider selling of Electrocomponents shares, than buying. They sold for an average price of about UK£7.29. We don't gain confidence from insider selling below the recent share price. But we wouldn't put too much weight on the insider selling. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

I will like Electrocomponents better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Insider Ownership of Electrocomponents

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Electrocomponents insiders own about UK£14m worth of shares. That equates to 0.3% of the company. 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 Do The Electrocomponents Insider Transactions Indicate?

The fact that there have been no Electrocomponents insider transactions recently certainly doesn't bother us. Still, the insider transactions at Electrocomponents in the last 12 months are not very heartening. But it's good to see that insiders own shares in the company. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. Case in point: We've spotted 1 warning sign for Electrocomponents you should be aware of.

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, but not derivative transactions.

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This article by Simply Wall St is general in nature. 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.
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