GMS Inc.'s (NYSE:GMS) insiders who sold earlier this year may be offered solace in this recent price drop

GMS Inc.'s (NYSE:GMS) value has fallen 4.4% in the last week, but insiders who sold US$2.1m worth of stock over the last year have had less success. Insiders would probably have been better off holding on to their shares given that the average selling price of US$52.24 is still lower than the current share price.

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.

View our latest analysis for GMS

GMS Insider Transactions Over The Last Year

The Independent Non-Executive Chairman, John Gavin, made the biggest insider sale in the last 12 months. That single transaction was for US$594k worth of shares at a price of US$60.52 each. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The good news is that this large sale was at well above current price of US$53.75. So it is hard to draw any strong conclusion from it.

In the last year GMS insiders didn't buy any company stock. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, 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).

Insiders At GMS Have Sold Stock Recently

Over the last three months, we've seen significant insider selling at GMS. Specifically, insiders ditched US$911k 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.

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. Insiders own 0.5% of GMS shares, worth about US$12m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

What Might The Insider Transactions At GMS Tell Us?

Insiders haven't bought GMS stock in the last three months, but there was some selling. And there weren't any purchases to give us comfort, over the last year. But since GMS is profitable and growing, we're not too worried by this. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We're in no rush to buy! While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. When we did our research, we found 3 warning signs for GMS (1 is concerning!) that we believe deserve your full attention.

But note: GMS 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.

What are the risks and opportunities for GMS?

NYSE:GMS

GMS

GMS Inc. distributes wallboard, ceilings, steel framing and complementary construction products in the United States and Canada.Show more

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Rewards

• Trading at 30.2% below our estimate of its fair value

• Earnings grew by 44.7% over the past year

Risks

• Earnings are forecast to decline by an average of 9.9% per year for the next 3 years

• Significant insider selling over the past 3 months

• Has a high level of debt

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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.