Sprouts Farmers Market Insiders Sell US$26m Of Stock, Possibly Signalling Caution

In the last year, many Sprouts Farmers Market, Inc. (NASDAQ:SFM) insiders sold a substantial stake in the company which may have sparked shareholders' attention. 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, if numerous insiders are selling, shareholders should investigate more.

Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.

See our latest analysis for Sprouts Farmers Market

Sprouts Farmers Market Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the CEO & Director, Jack Sinclair, for US$4.2m worth of shares, at about US$63.56 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$102. 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. 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 25% of Jack Sinclair's holding.

Insiders in Sprouts Farmers Market didn't buy any shares in the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

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Sprouts Farmers Market Insiders Are Selling The Stock

The last quarter saw substantial insider selling of Sprouts Farmers Market shares. In total, insiders sold US$5.5m 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.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. It appears that Sprouts Farmers Market insiders own 0.4% of the company, worth about US$41m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At Sprouts Farmers Market Tell Us?

Insiders sold Sprouts Farmers Market shares recently, but they didn't buy any. And even if we look at the last year, we didn't see any purchases. But it is good to see that Sprouts Farmers Market is growing earnings. Insiders own shares, but we're still pretty cautious, given the history of sales. We're in no rush to buy! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 1 warning sign for Sprouts Farmers Market you should be aware of.

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.

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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.