Possible Bearish Signals With Severn Trent Insiders Disposing Stock

Many Severn Trent PLC (LON:SVT) 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, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

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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Severn Trent Insider Transactions Over The Last Year

The CFO & Executive Director, Helen Miles, made the biggest insider sale in the last 12 months. That single transaction was for UK£501k worth of shares at a price of UK£27.14 each. That means that an insider was selling shares at slightly below the current price (UK£27.83). 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. This single sale was just 24% of Helen Miles's stake.

Happily, we note that in the last year insiders paid UK£95k for 3.60k shares. But they sold 50.15k shares for UK£1.4m. Over the last year we saw more insider selling of Severn Trent shares, than buying. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

See our latest analysis for Severn Trent

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Severn Trent Insiders Bought Stock Recently

Over the last three months, we've seen significant insider buying at Severn Trent. In total, insiders bought UK£95k worth of shares in that time, and we didn't record any sales whatsoever. That shows some optimism about the company's future.

Insider Ownership

Many investors like to check how much of a company is owned by 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. It appears that Severn Trent insiders own 0.2% of the company, worth about UK£15m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At Severn Trent Tell Us?

The recent insider purchases are heartening. However, the longer term transactions are not so encouraging. While recent transactions indicate confidence in Severn Trent, insiders don't own enough of the company to overcome our cautiousness about the longer term transactions. So they seem pretty well aligned, overall. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Severn Trent. To assist with this, we've discovered 2 warning signs that you should run your eye over to get a better picture of Severn Trent.

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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.