Powell Industries Insiders Sold US$40m Of Shares Suggesting Hesitancy

Over the past year, many Powell Industries, Inc. (NASDAQ:POWL) insiders sold a significant stake in the company which may have piqued investors' interest. Knowing whether insiders are buying is usually more helpful when evaluating insider transactions, as insider selling can have various explanations. 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, logic dictates you should pay some attention to whether insiders are buying or selling shares.

See our latest analysis for Powell Industries

The Last 12 Months Of Insider Transactions At Powell Industries

Over the last year, we can see that the biggest insider sale was by the insider, Thomas Powell, for US$5.3m worth of shares, at about US$218 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$254. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. 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 1.1% of Thomas Powell's holding.

Powell Industries insiders didn't buy any shares 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 click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

I will like Powell Industries better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.

Powell Industries Insiders Are Selling The Stock

Over the last three months, we've seen significant insider selling at Powell Industries. Specifically, insiders ditched US$17m 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 Powell Industries Boast High Insider Ownership?

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Powell Industries insiders own about US$667m worth of shares (which is 22% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Powell Industries Tell Us?

Insiders haven't bought Powell Industries stock in the last three months, but there was some selling. Looking to the last twelve months, our data doesn't show any insider buying. On the plus side, Powell Industries makes money, and is growing profits. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 2 warning signs with Powell Industries and understanding them should be part of your investment process.

But note: Powell Industries 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 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.