It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in EnerSys (NYSE:ENS).
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
EnerSys Insider Transactions Over The Last Year
The insider, Holger Aschke, made the biggest insider sale in the last 12 months. That single transaction was for US$732k worth of shares at a price of US$73.78 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$93.98. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 26% of Holger Aschke's holding.
Insiders in EnerSys didn't buy any shares in the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
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).
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 1.1% of EnerSys shares, worth about US$45m. 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 EnerSys Insiders?
There haven't been any insider transactions in the last three months -- that doesn't mean much. We don't take much encouragement from the transactions by EnerSys insiders. The modest level of insider ownership is, at least, some comfort. 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. For example - EnerSys has 3 warning signs we think you should be aware of.
Of course EnerSys 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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What are the risks and opportunities for EnerSys?
Trading at 60.1% below our estimate of its fair value
Earnings are forecast to grow 37.67% per year
Debt is not well covered by operating cash flow
This article by Simply Wall St is general in nature. 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.
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