Cheesecake Factory Insiders Sell US$1.3m Of Stock, Possibly Signalling Caution

Many The Cheesecake Factory Incorporated (NASDAQ:CAKE) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. 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, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

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.

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The Last 12 Months Of Insider Transactions At Cheesecake Factory

In the last twelve months, the biggest single sale by an insider was when the President of The Cheesecake Factory Bakery Incorporated, Keith Carango, sold US$653k worth of shares at a price of US$49.89 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$51.65. 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. We note that the biggest single sale was only 26% of Keith Carango's holding.

In the last year Cheesecake Factory insiders didn't buy any company stock. 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!

View our latest analysis for Cheesecake Factory

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Insiders At Cheesecake Factory Have Sold Stock Recently

Over the last three months, we've seen significant insider selling at Cheesecake Factory. In total, Executive VP & CFO Matthew Clark sold US$537k 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

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Cheesecake Factory insiders own 7.7% of the company, currently worth about US$202m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Does This Data Suggest About Cheesecake Factory Insiders?

An insider hasn't bought Cheesecake Factory 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 Cheesecake Factory 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. While conducting our analysis, we found that Cheesecake Factory has 3 warning signs and it would be unwise to ignore them.

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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.