Northrop Grumman Corporation (NYSE:NOC) insiders sold US$2.2m worth of stock suggesting impending weakness.

Many Northrop Grumman Corporation (NYSE:NOC) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. Knowing whether insiders are buying is usually more helpful when evaluating insider transactions, as insider selling can have various explanations. However, if numerous insiders are selling, shareholders should investigate more.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Before we look at these insider transactions though, you might like to know that our analysis indicates that NOC is potentially undervalued!

The Last 12 Months Of Insider Transactions At Northrop Grumman

In the last twelve months, the biggest single sale by an insider was when the insider, David Perry, sold US$1.2m worth of shares at a price of US$394 per share. That means that an insider was selling shares at slightly below the current price (US$470). 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. This single sale was just 25% of David Perry's stake.

Insiders in Northrop Grumman 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. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

I will like Northrop Grumman better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Does Northrop Grumman 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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Northrop Grumman insiders own 0.2% of the company, currently worth about US$131m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The Northrop Grumman Insider Transactions Indicate?

There haven't been any insider transactions in the last three months -- that doesn't mean much. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of Northrop Grumman insider transactions don't fill us with confidence. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example - Northrop Grumman has 2 warning signs we think you should be aware of.

Of course Northrop Grumman 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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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.