Divi's Laboratories Insiders Sold ₹620m Of Shares Suggesting Hesitancy

Many Divi's Laboratories Limited (NSE:DIVISLAB) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. 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, 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, we would consider it foolish to ignore insider transactions altogether.

We've discovered 1 warning sign about Divi's Laboratories. View them for free.

The Last 12 Months Of Insider Transactions At Divi's Laboratories

Over the last year, we can see that the biggest insider sale was by the insider, Madhusudana Divi, for ₹238m worth of shares, at about ₹4,336 per share. That means that even when the share price was below the current price of ₹6,087, 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. 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 21% of Madhusudana Divi's stake.

Happily, we note that in the last year insiders paid ₹12m for 2.00k shares. But they sold 133.65k shares for ₹620m. In total, Divi's Laboratories insiders sold more than they bought over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

View our latest analysis for Divi's Laboratories

I will like Divi's Laboratories 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 Divi's Laboratories Have Sold Stock Recently

Over the last three months, we've seen significant insider selling at Divi's Laboratories. In total, insiders sold ₹4.8m 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

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Divi's Laboratories insiders own 49% of the company, currently worth about ₹794b 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.

What Might The Insider Transactions At Divi's Laboratories Tell Us?

Insiders sold Divi's Laboratories shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But since Divi's Laboratories 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. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 1 warning sign with Divi's Laboratories and understanding this should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.