Did Energy Recovery, Inc. (NASDAQ:ERII) Insiders Sell Shares?

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in Energy Recovery, Inc. (NASDAQ:ERII).

What Is Insider Selling?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.

Check out our latest analysis for Energy Recovery

The Last 12 Months Of Insider Transactions At Energy Recovery

The Independent Director, Ole Lorentzen, made the biggest insider sale in the last 12 months. That single transaction was for US$1.3m worth of shares at a price of US$8.73 each. So we know that an insider sold shares at around the present share price of US$7.42. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign.

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

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

Energy Recovery Insiders Are Selling The Stock

The last quarter saw substantial insider selling of Energy Recovery shares. In total, Independent Director Arve Hanstveit dumped US$327k worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Does Energy Recovery Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 4.1% of Energy Recovery shares, worth about US$17m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At Energy Recovery Tell Us?

An insider sold stock recently, but they haven't been buying. And there weren't any purchases to give us comfort, over the last year. Insiders own shares, but we're still pretty cautious, given the history of sales. We'd think twice before buying! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. At Simply Wall St, we've found that Energy Recovery has 3 warning signs (1 is concerning!) that deserve your attention before going any further with your analysis.

Of course Energy Recovery 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.