Paycom Software Insiders Sell US$2.2m Of Stock, Possibly Signalling Caution

Many Paycom Software, Inc. (NYSE:PAYC) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. When evaluating insider transactions, knowing whether insiders are buying versus if they selling is usually more beneficial, as the latter can be open to many interpretations. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.

See our latest analysis for Paycom Software

Paycom Software Insider Transactions Over The Last Year

The Chief Administrative Officer, Jason Clark, made the biggest insider sale in the last 12 months. That single transaction was for US$1.7m worth of shares at a price of US$185 each. That means that even when the share price was below the current price of US$193, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. 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 17% of Jason Clark's stake.

Happily, we note that in the last year insiders paid US$50k for 315.00 shares. But they sold 11.39k shares for US$2.2m. All up, insiders sold more shares in Paycom Software than they bought, over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

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

Insiders At Paycom Software Have Sold Stock Recently

The last three months saw significant insider selling at Paycom Software. In total, Lead Independent Director Frederick Peters sold US$285k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Insider Ownership Of Paycom Software

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Paycom Software insiders own about US$1.4b worth of shares (which is 13% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Does This Data Suggest About Paycom Software Insiders?

An insider sold Paycom Software shares recently, but they didn't buy any. Zooming out, the longer term picture doesn't give us much comfort. But since Paycom Software is profitable and growing, we're not too worried by this. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

But note: Paycom Software 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.