Keep An Eye On LGI Homes As Insider Stock Selling Hits US$2.9m

Even though LGI Homes, Inc. (NASDAQ:LGIH) stock gained 11% last week, insiders who sold US$2.9m worth of stock over the past year are probably better off. Selling at an average price of US$111, which is higher than the current price, may have been the wisest decision for these insiders as their investment would have been worth less now than when they sold.

While insider transactions are not the most important thing when it comes to long-term investing, we do think it is perfectly logical to keep tabs on what insiders are doing.

See our latest analysis for LGI Homes

The Last 12 Months Of Insider Transactions At LGI Homes

In the last twelve months, the biggest single sale by an insider was when the Chairman & CEO, Eric Lipar, sold US$1.2m worth of shares at a price of US$113 per share. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. The good news is that this large sale was at well above current price of US$92.47. So it may not shed much light on insider confidence at current levels.

In the last year LGI Homes insiders didn't buy any company stock. 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!

I will like LGI Homes better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.

Insider Ownership Of LGI Homes

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. It's great to see that LGI Homes insiders own 12% of the company, worth about US$270m. 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 LGI Homes Insider Transactions Indicate?

It doesn't really mean much that no insider has traded LGI Homes shares in the last quarter. While we feel good about high insider ownership of LGI Homes, we can't say the same about the selling of shares. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that LGI Homes has 1 warning sign and it would be unwise to ignore this.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.