Possible Bearish Signals With Mercury Systems Insiders Disposing Stock

Mercury Systems, Inc. (NASDAQ:MRCY) shareholders might have a reason to worry after multiple insiders sold their shares over the last year. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.

View our latest analysis for Mercury Systems

The Last 12 Months Of Insider Transactions At Mercury Systems

In the last twelve months, the biggest single sale by an insider was when the Executive VP & CFO, David Farnsworth, sold US$265k worth of shares at a price of US$39.49 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$41.05. 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. It is worth noting that this sale was only 5.3% of David Farnsworth's holding.

Happily, we note that in the last year insiders paid US$599k for 21.62k shares. But they sold 32.87k shares for US$1.2m. All up, insiders sold more shares in Mercury Systems than they bought, over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

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Insiders At Mercury Systems Have Sold Stock Recently

The last quarter saw substantial insider selling of Mercury Systems shares. In total, insiders sold US$132k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Insider Ownership

Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Mercury Systems insiders own about US$50m worth of shares. That equates to 2.0% of the company. 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 Mercury Systems Tell Us?

Insiders haven't bought Mercury Systems stock in the last three months, but there was some selling. Zooming out, the longer term picture doesn't give us much comfort. Insiders own shares, but we're still pretty cautious, given the history of sales. So we'd only buy after careful consideration. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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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.