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 before you buy or sell GMS Inc. (NYSE:GMS), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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, rules govern insider transactions, and certain disclosures are required.
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. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.
The Last 12 Months Of Insider Transactions At GMS
Over the last year, we can see that the biggest insider purchase was by insider Ronald Ross for US$1.3m worth of shares, at about US$16.43 per share. Even though the purchase was made at a significantly lower price than the recent price (US$24.90), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
GMS insiders may have bought shares in the last year, but they didn't sell any. They paid about US$13.94 on average. To my mind it is good that insiders have invested their own money in the company. However, we do note that they were buying at significantly lower prices than today's share price. 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 1.3% of GMS shares, worth about US$14m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About GMS Insiders?
It doesn't really mean much that no insider has traded GMS shares in the last quarter. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in GMS and their transactions don't cause us concern. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing GMS. At Simply Wall St, we've found that GMS has 4 warning signs (1 is concerning!) that deserve your attention before going any further with your analysis.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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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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