Insiders At Divi's Laboratories Sold ₹939m In Stock, Alluding To Potential Weakness

In the last year, many Divi's Laboratories Limited (NSE:DIVISLAB) insiders sold a substantial stake in the company which may have sparked shareholders' attention. 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.

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.

Check out our latest analysis for Divi's Laboratories

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

In the last twelve months, the biggest single sale by an insider was when the insider, Madhusudana Divi, sold ₹238m worth of shares at a price of ₹4,336 per share. That means that an insider was selling shares at slightly below the current price (₹6,173). 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.

Over the last year we saw more insider selling of Divi's Laboratories shares, than buying. 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!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Insiders At Divi's Laboratories Have Bought Stock Recently

Over the last three months, we've seen a bit of insider buying at Divi's Laboratories. insider L. Lakshmi bought ₹8.9m worth of shares in that time. But they sold ₹7.0m worth. It is good to see that insiders have been buying, but they did not buy very many shares, in the scheme of things.

Insider Ownership Of Divi's Laboratories

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Divi's Laboratories insiders own 49% of the company, worth about ₹806b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

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

The recent insider purchase is heartening. On the other hand the transaction history, over the last year, isn't so positive. The recent buying by an insider , along with high insider ownership, suggest that Divi's Laboratories insiders are fairly aligned, and optimistic. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. You'd be interested to know, that we found 1 warning sign for Divi's Laboratories and we suggest you have a look.

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 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.