Insiders At Trex Company Sold US$2.2m In Stock, Alluding To Potential Weakness

Over the past year, many Trex Company, Inc. (NYSE:TREX) insiders sold a significant stake in the company which may have piqued investors' interest. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

See our latest analysis for Trex Company

Trex Company Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the Senior VP & Chief Human Resources Officer, Jacob Rudolph, for US$1.5m worth of shares, at about US$90.90 per share. 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$70.23. So it may not shed much light on insider confidence at current levels. Notably Jacob Rudolph was also the biggest buyer, having purchased US$10k worth of shares.

All up, insiders sold more shares in Trex Company than they bought, over the last year. 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!

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Trex Company Insiders Are Selling The Stock

Over the last three months, we've seen notably more insider selling, than insider buying, at Trex Company. In that time, Senior VP & Chief Human Resources Officer Jacob Rudolph dumped US$107k worth of shares. On the flip side, Senior VP & Chief Human Resources Officer Jacob Rudolph spent US$2.8k on purchasing shares. Because the selling vastly outweighs the buying, we'd say this is a somewhat bearish sign.

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. We usually like to see fairly high levels of insider ownership. It appears that Trex Company insiders own 0.5% of the company, worth about US$37m. 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 Do The Trex Company Insider Transactions Indicate?

The stark truth for Trex Company is that there has been more insider selling than insider buying in the last three months. Zooming out, the longer term picture doesn't give us much comfort. But since Trex Company is profitable and growing, we're not too worried by this. While insiders do own shares, they don't own a heap, and they have been selling. We're in no rush to buy! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 1 warning sign for Trex Company you should be aware of.

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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 of direct interests only, but not derivative transactions or indirect interests.

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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.