Insiders at AAR Corp. (NYSE:AIR) sold US$3.4m worth of stock, a potential red flag that needs to be monitored

By
Simply Wall St
Published
April 13, 2022
NYSE:AIR
Source: Shutterstock

While it’s been a great week for AAR Corp. (NYSE:AIR) shareholders after stock gained 6.7%, they should consider it with a grain of salt. Even though stock prices were relatively low, insiders elected to sell US$3.4m worth of stock in the last year, which could indicate some expected downturn.

While insider transactions are not the most important thing when it comes to long-term investing, we do think it is perfectly logical to keep tabs on what insiders are doing.

Check out our latest analysis for AAR

The Last 12 Months Of Insider Transactions At AAR

In fact, the recent sale by David Storch was the biggest sale of AAR shares made by an insider individual in the last twelve months, according to our records. That means that even when the share price was slightly below the current price of US$50.23, an insider wanted to cash in some shares. 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. 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 2.5% of David Storch's stake.

Insiders in AAR didn't buy any shares in the last year. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
NYSE:AIR Insider Trading Volume April 13th 2022

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).

Insiders at AAR Have Sold Stock Recently

The last three months saw significant insider selling at AAR. In total, insiders sold US$3.4m 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 AAR Boast High Insider Ownership?

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. AAR insiders own about US$89m worth of shares. That equates to 5.1% 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.

So What Does This Data Suggest About AAR Insiders?

Insiders sold AAR shares recently, but they didn't buy any. And there weren't any purchases to give us comfort, over the last year. On the plus side, AAR makes money, and is growing profits. Insiders own shares, but we're still pretty cautious, given the history of sales. We're in no rush to buy! So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. Every company has risks, and we've spotted 1 warning sign for AAR you should know about.

Of course AAR 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.

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