Insiders At Cheesecake Factory Sold US$2.5m In Stock, Alluding To Potential Weakness

Over the past year, many The Cheesecake Factory Incorporated (NASDAQ:CAKE) 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, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.

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The Last 12 Months Of Insider Transactions At Cheesecake Factory

Over the last year, we can see that the biggest insider sale was by the President, David Gordon, for US$732k worth of shares, at about US$50.68 per share. That means that an insider was selling shares at slightly below the current price (US$62.36). We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. We note that the biggest single sale was only 13% of David Gordon's holding.

Cheesecake Factory insiders didn't buy any shares over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

View our latest analysis for Cheesecake Factory

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Cheesecake Factory Insiders Are Selling The Stock

Over the last three months, we've seen significant insider selling at Cheesecake Factory. In total, insiders sold US$1.4m 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 Of Cheesecake Factory

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's great to see that Cheesecake Factory insiders own 8.0% of the company, worth about US$246m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Does This Data Suggest About Cheesecake Factory Insiders?

Insiders sold stock recently, but they haven't been buying. And there weren't any purchases to give us comfort, over the last year. On the plus side, Cheesecake Factory makes money, and is growing profits. It is good to see high insider ownership, but the insider selling leaves us cautious. 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. For example - Cheesecake Factory has 3 warning signs we think you should be aware of.

Of course Cheesecake Factory 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.