Possible bearish signals as Larsen & Toubro Limited (NSE:LT) insiders disposed of ₹142m worth of stock

By
Simply Wall St
Published
November 18, 2021
NSEI:LT
Source: Shutterstock

Quite a few Larsen & Toubro Limited (NSE:LT) insiders sold their shares over the past year, which may be a cause for concern. Knowing whether insiders are buying is usually more helpful when evaluating insider transactions, as insider selling can have various explanations. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Check out our latest analysis for Larsen & Toubro

Larsen & Toubro Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the insider, A. Parab, for ₹24m worth of shares, at about ₹1,188 per share. That means that even when the share price was below the current price of ₹1,897, 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. 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. This single sale was just 15% of A. Parab's stake.

Happily, we note that in the last year insiders paid ₹6.0m for 3.90k shares. On the other hand they divested 101.80k shares, for ₹142m. In total, Larsen & Toubro insiders sold more than they bought 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!

insider-trading-volume
NSEI:LT Insider Trading Volume November 19th 2021

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Larsen & Toubro Insiders Are Selling The Stock

Over the last three months, we've seen significant insider selling at Larsen & Toubro. In total, insiders sold ₹20m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Insider Ownership of Larsen & Toubro

Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 0.2% of Larsen & Toubro shares, worth about ₹4.3b. 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 Larsen & Toubro Insiders?

Insiders haven't bought Larsen & Toubro stock in the last three months, but there was some selling. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But since Larsen & Toubro is profitable and growing, we're not too worried by this. It is good to see high insider ownership, but the insider selling leaves us cautious. While we like knowing 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. For example - Larsen & Toubro has 4 warning signs we think 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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