Selling Green Brick Partners Shares at a Lower Price Than Current Market Value May Have Been a Costly Mistake for Insiders

Even though Green Brick Partners, Inc. (NYSE:GRBK) has fallen by 12% over the past week , insiders who sold US$5.2m worth of stock over the past year have had less luck. The average selling price of US$65.48 is still lower than the current share price, or in other words, insiders would have been better off holding on to their shares.

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.

View our latest analysis for Green Brick Partners

Green Brick Partners Insider Transactions Over The Last Year

The CFO, Treasurer & Secretary, Richard Costello, made the biggest insider sale in the last 12 months. That single transaction was for US$2.3m worth of shares at a price of US$56.77 each. That means that an insider was selling shares at slightly below the current price (US$58.64). When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 43% of Richard Costello's holding.

Over the last year we saw more insider selling of Green Brick Partners shares, than buying. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

For those who like to find hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.

Green Brick Partners Insiders Are Selling The Stock

The last three months saw significant insider selling at Green Brick Partners. In total, Lead Independent Director Richard Press dumped US$242k worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.

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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It's great to see that Green Brick Partners insiders own 7.9% of the company, worth about US$221m. 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 Do The Green Brick Partners Insider Transactions Indicate?

An insider sold stock recently, but they haven't been buying. Zooming out, the longer term picture doesn't give us much comfort. But it is good to see that Green Brick Partners is growing earnings. 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. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. You'd be interested to know, that we found 1 warning sign for Green Brick Partners and we suggest you have a look.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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 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.