Who Has Been Selling Divi's Laboratories Limited (NSE:DIVISLAB) Shares?

By
Simply Wall St
Published
February 23, 2021
NSEI:DIVISLAB
Source: Shutterstock

It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Divi's Laboratories Limited (NSE:DIVISLAB).

Do Insider Transactions Matter?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.

Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

See our latest analysis for Divi's Laboratories

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

The insider, Nimmagadda Anirudh, made the biggest insider sale in the last 12 months. That single transaction was for ₹64m worth of shares at a price of ₹3,318 each. That means that even when the share price was below the current price of ₹3,448, an insider wanted to cash in some shares. 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. 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. We note that the biggest single sale was only 9.4% of Nimmagadda Anirudh's holding.

Happily, we note that in the last year insiders paid ₹24m for 7.36k shares. On the other hand they divested 227.75k shares, for ₹641m. All up, insiders sold more shares in Divi's Laboratories 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:DIVISLAB Insider Trading Volume February 24th 2021

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

Insiders at Divi's Laboratories Have Sold Stock Recently

We've seen more insider selling than insider buying at Divi's Laboratories recently. In total, insiders sold ₹30m worth of shares in that time. On the other hand we note insiders bought ₹8.5m worth of shares. Generally this level of net selling might be considered a bit bearish.

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. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Divi's Laboratories insiders own 49% of the company, worth about ₹458b. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

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

The insider sales have outweighed the insider buying, at Divi's Laboratories, in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. On the plus side, Divi's Laboratories makes money, and is growing profits. 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. To assist with this, we've discovered 2 warning signs that you should run your eye over to get a better picture of Divi's Laboratories.

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, but not derivative transactions.

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