Stock Analysis

How Much Are Signature Bank (NASDAQ:SBNY) Insiders Taking Off The Table?

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NasdaqGS:SBNY
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We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Signature Bank (NASDAQ:SBNY), you may well want to know whether insiders have been buying or selling.

What Is Insider Buying?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

See our latest analysis for Signature Bank

Signature Bank Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the Independent Director, Derrick Cephas, for US$158k worth of shares, at about US$144 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$152. 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. 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. This single sale was just 17% of Derrick Cephas's stake.

Signature Bank insiders didn't buy any shares over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
NasdaqGS:SBNY Insider Trading Volume January 22nd 2021

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Insider Ownership of Signature Bank

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. Signature Bank insiders own about US$200m worth of shares (which is 2.5% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Do The Signature Bank Insider Transactions Indicate?

It doesn't really mean much that no insider has traded Signature Bank shares in the last quarter. While we feel good about high insider ownership of Signature Bank, we can't say the same about the selling of shares. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that Signature Bank has 2 warning signs and it would be unwise to ignore them.

But note: Signature Bank may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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, but not derivative transactions.

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What are the risks and opportunities for Signature Bank?

Signature Bank provides commercial banking products and services.

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Rewards

  • Trading at 35.3% below our estimate of its fair value

  • Earnings grew by 47.9% over the past year

Risks

  • Earnings are forecast to decline by an average of 13.1% per year for the next 3 years

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