Possible Bearish Signals With Toll Brothers Insiders Disposing Stock

The fact that multiple Toll Brothers, Inc. (NYSE:TOL) 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, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for Toll Brothers

The Last 12 Months Of Insider Transactions At Toll Brothers

In the last twelve months, the biggest single sale by an insider was when the Independent Director, Carl Marbach, sold US$724k worth of shares at a price of US$72.37 per share. That means that an insider was selling shares at slightly below the current price (US$77.87). 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. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 14% of Carl Marbach's holding.

In the last year Toll Brothers 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. By clicking on the graph below, you can see the precise details of each insider transaction!

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Toll Brothers Insiders Are Selling The Stock

Over the last three months, we've seen significant insider selling at Toll Brothers. Specifically, insiders ditched US$618k worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Toll Brothers insiders own about US$50m worth of shares. That equates to 0.6% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Do The Toll Brothers Insider Transactions Indicate?

Insiders haven't bought Toll Brothers stock in the last three months, but there was some selling. And even if we look at the last year, we didn't see any purchases. But it is good to see that Toll Brothers is growing earnings. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We'd practice some caution before buying! While we like knowing 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. Case in point: We've spotted 2 warning signs for Toll Brothers you should be aware of, and 1 of them shouldn't be ignored.

Of course Toll Brothers may not be the best stock to buy. So you may wish to see this free collection of high quality 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.

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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.