Advanced Drainage Systems Insiders Sold US$4.7m Of Shares Suggesting Hesitancy

The fact that multiple Advanced Drainage Systems, Inc. (NYSE:WMS) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. 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, if numerous insiders are selling, shareholders should investigate more.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Check out our latest analysis for Advanced Drainage Systems

The Last 12 Months Of Insider Transactions At Advanced Drainage Systems

In the last twelve months, the biggest single sale by an insider was when the insider, Michael Huebert, sold US$1.7m worth of shares at a price of US$173 per share. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$118. So it may not shed much light on insider confidence at current levels.

In the last year Advanced Drainage Systems insiders didn't buy any company stock. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

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Insider Ownership

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Advanced Drainage Systems insiders own 1.5% of the company, currently worth about US$137m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Does This Data Suggest About Advanced Drainage Systems Insiders?

It doesn't really mean much that no insider has traded Advanced Drainage Systems shares in the last quarter. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of Advanced Drainage Systems insider transactions don't fill us with confidence. 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. In terms of investment risks, we've identified 1 warning sign with Advanced Drainage Systems and understanding it should be part of your investment process.

But note: Advanced Drainage Systems 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 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.