Insiders of Meridian Energy Limited (NZSE:MEL) forfeit last week's 4.4% gains after selling stock earlier this year

While it’s been a great week for Meridian Energy Limited (NZSE:MEL) shareholders after stock gained 4.4%, they should consider it with a grain of salt. In spite of the relatively cheap prices, insiders made the decision to sell NZ$609k worth of stock in the last 12 months. This could be a warning indicator of vulnerabilities in the future.

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.

View our latest analysis for Meridian Energy

Meridian Energy Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the Chief People Officer, Jason Stein, sold NZ$538k worth of shares at a price of NZ$5.37 per share. That means that an insider was selling shares at below the current price (NZ$5.45). 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. 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. We note that the biggest single sale was only 45% of Jason Stein's holding.

Happily, we note that in the last year insiders paid NZ$158k for 31.06k shares. But insiders sold 114.00k shares worth NZ$609k. All up, insiders sold more shares in Meridian Energy 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!

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Meridian Energy Insiders Are Selling The Stock

Over the last three months, we've seen notably more insider selling, than insider buying, at Meridian Energy. We note insiders cashed in NZ$590k worth of shares. On the other hand we note insiders bought NZ$44k worth of shares. Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the shares are not cheap.

Insider Ownership Of Meridian Energy

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. Insiders own 0.07% of Meridian Energy shares, worth about NZ$10m, according to our data. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!

So What Does This Data Suggest About Meridian Energy Insiders?

The stark truth for Meridian Energy is that there has been more insider selling than insider buying in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But it is good to see that Meridian Energy is growing earnings. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We're in no rush to buy! 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. Case in point: We've spotted 2 warning signs for Meridian Energy you should be aware of.

Of course Meridian Energy 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.

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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.