Don't Ignore The Fact That This Insider Just Sold Some Shares In Dr. Lal PathLabs Limited (NSE:LALPATHLAB)

Published
June 25, 2022
NSEI:LALPATHLAB
Source: Shutterstock

Some Dr. Lal PathLabs Limited (NSE:LALPATHLAB) shareholders may be a little concerned to see that the Non-Executive Director, Archana Erdmann, recently sold a substantial ₹164m worth of stock at a price of ₹2,014 per share. However, that sale only accounted for 4.4% of their holding, so arguably it doesn't say much about their conviction.

Check out our latest analysis for Dr. Lal PathLabs

Dr. Lal PathLabs Insider Transactions Over The Last Year

Notably, that recent sale by Archana Erdmann is the biggest insider sale of Dr. Lal PathLabs shares that we've seen in the last year. So it's clear an insider wanted to take some cash off the table, even slightly below the current price of ₹2,031. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 4.4% of Archana Erdmann's stake.

In the last twelve months insiders purchased 3.86k shares for ₹11m. On the other hand they divested 236.86k shares, for ₹599m. All up, insiders sold more shares in Dr. Lal PathLabs 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:LALPATHLAB Insider Trading Volume June 25th 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).

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Dr. Lal PathLabs insiders own 58% of the company, currently worth about ₹97b based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Does This Data Suggest About Dr. Lal PathLabs Insiders?

Insiders haven't bought Dr. Lal PathLabs stock in the last three months, but there was some selling. And our longer term analysis of insider transactions didn't bring confidence, either. On the plus side, Dr. Lal PathLabs makes money, and is growing profits. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. 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. To help with this, we've discovered 4 warning signs (1 shouldn't be ignored!) that you ought to be aware of before buying any shares in Dr. Lal PathLabs.

Of course Dr. Lal PathLabs 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.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.