PriceSmart Insiders Sell US$7.1m Of Stock, Possibly Signalling Caution

Many PriceSmart, Inc. (NASDAQ:PSMT) 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 is usually more beneficial than knowing whether they are selling, 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.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

Check out our latest analysis for PriceSmart

The Last 12 Months Of Insider Transactions At PriceSmart

In the last twelve months, the biggest single sale by an insider was when the Director, Sherry Bahrambeygui, sold US$2.0m worth of shares at a price of US$89.81 per share. So what is clear is that an insider saw fit to sell at around the current price of US$86.25. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. In this case, the big sale took place at around the current price, so it's not too bad (but it's still not a positive).

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

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

Insiders At PriceSmart Have Sold Stock Recently

Over the last three months, we've seen significant insider selling at PriceSmart. Specifically, insiders ditched US$5.6m 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.

Does PriceSmart Boast High Insider Ownership?

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. PriceSmart insiders own about US$221m worth of shares (which is 8.5% 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.

What Might The Insider Transactions At PriceSmart Tell Us?

Insiders haven't bought PriceSmart 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. On the plus side, PriceSmart makes money, and is growing profits. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 1 warning sign with PriceSmart and understanding it should be part of your investment process.

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.

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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.

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