Chefs' Warehouse Insiders Sell US$19m Of Stock, Possibly Signalling Caution

Over the past year, many The Chefs' Warehouse, Inc. (NASDAQ:CHEF) insiders sold a significant stake in the company which may have piqued investors' interest. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

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.

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The Last 12 Months Of Insider Transactions At Chefs' Warehouse

The Founder, Christopher Pappas, made the biggest insider sale in the last 12 months. That single transaction was for US$9.8m worth of shares at a price of US$48.85 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$58.54. 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 7.4% of Christopher Pappas's holding.

Insiders in Chefs' Warehouse didn't buy any shares in the last year. 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!

See our latest analysis for Chefs' Warehouse

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Does Chefs' Warehouse Boast High Insider Ownership?

Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Chefs' Warehouse insiders own 11% of the company, currently worth about US$262m 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 Do The Chefs' Warehouse Insider Transactions Indicate?

The fact that there have been no Chefs' Warehouse insider transactions recently certainly doesn't bother us. While we feel good about high insider ownership of Chefs' Warehouse, we can't say the same about the selling of shares. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Chefs' Warehouse. In terms of investment risks, we've identified 1 warning sign with Chefs' Warehouse and understanding it should be part of your investment process.

Of course Chefs' Warehouse 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.