Stock Analysis

Ducommun Incorporated (NYSE:DCO) Insiders Increased Their Holdings

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NYSE:DCO
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It is not uncommon to see companies perform well in the years after insiders buy shares. 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 shareholders might well want to know whether insiders have been buying or selling shares in Ducommun Incorporated (NYSE:DCO).

What Is Insider Selling?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, such insiders must disclose their trading activities, and not trade on inside information.

We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

See our latest analysis for Ducommun

Ducommun Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Chairman Stephen Oswald bought US$509k worth of shares at a price of US$33.93 per share. We do like to see buying, but this purchase was made at well below the current price of US$55.90. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.

Over the last year, we can see that insiders have bought 54.50k shares worth US$1.8m. But insiders sold 9.71k shares worth US$429k. In the last twelve months there was more buying than selling by Ducommun insiders. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

insider-trading-volume
NYSE:DCO Insider Trading Volume February 23rd 2021

Ducommun is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insiders at Ducommun Have Sold Stock Recently

The last quarter saw substantial insider selling of Ducommun shares. In total, Independent Director Robert Ducommun sold US$110k 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 Ducommun 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. We usually like to see fairly high levels of insider ownership. Insiders own 7.7% of Ducommun shares, worth about US$51m. 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 Ducommun Insiders?

An insider sold stock recently, but they haven't been buying. But we take heart from prior transactions. And insiders do own shares. So we're not overly bothered by recent selling. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Our analysis shows 2 warning signs for Ducommun (1 is potentially serious!) and we strongly recommend you look at these before investing.

But note: Ducommun 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, but not derivative transactions.

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What are the risks and opportunities for Ducommun?

Ducommun Incorporated provides engineering and manufacturing products and services primarily to the aerospace and defense, industrial, medical, and other industries in the United States.

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Rewards

  • Trading at 25.6% below our estimate of its fair value

  • Earnings are forecast to grow 2.88% per year

  • Earnings grew by 283.3% over the past year

Risks

  • Debt is not well covered by operating cash flow

  • High level of non-cash earnings

  • Significant insider selling over the past 3 months

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