Selling Powell Industries Shares at a Lower Price Than Current Market Value May Have Been a Costly Mistake for Insiders

Powell Industries, Inc.'s (NASDAQ:POWL) stock price has dropped 17% in the previous week, but insiders who sold US$31m in stock over the past year have had less luck. Given that the average selling price of US$222 is still lower than the current share price, insiders would probably have been better off keeping their shares.

While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for Powell Industries

Powell Industries Insider Transactions Over The Last Year

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. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$177. So it may not tell us anything about how insiders feel about the current share price.

Powell Industries 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. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

For those who like to find hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.

Powell Industries Insiders Are Selling The Stock

The last quarter saw substantial insider selling of Powell Industries shares. In total, insiders dumped US$777k worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.

Does Powell Industries Boast High Insider Ownership?

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Powell Industries insiders own 22% of the company, currently worth about US$466m based on the recent share price. 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. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To help with this, we've discovered 2 warning signs (1 makes us a bit uncomfortable!) that you ought to be aware of before buying any shares in Powell Industries.

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.