Should You Take Comfort From Insider Transactions At Potbelly Corporation (NASDAQ:PBPB)?

By
Simply Wall St
Published
December 07, 2020

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in Potbelly Corporation (NASDAQ:PBPB).

Do Insider Transactions Matter?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.

Check out our latest analysis for Potbelly

Potbelly Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when insider Christopher Woodruff bought US$6.3m worth of shares at a price of US$5.00 per share. So it's clear an insider wanted to buy, at around the current price, which is US$5.29. Of course they may have changed their mind. But this suggests they are optimistic. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. In this case we're pleased to report that the insider purchases were made at close to current prices.

Happily, we note that in the last year insiders paid US$6.7m for 1.40m shares. But they sold 7.03k shares for US$27k. In the last twelve months there was more buying than selling by Potbelly insiders. 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!

NasdaqGS:PBPB Insider Trading Volume December 7th 2020

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Insiders at Potbelly Have Sold Stock Recently

Over the last three months, we've seen a bit of insider selling at Potbelly. Senior VP & Chief Information Officer Jeffrey Douglas divested only US$27k worth of shares in that time. Neither the lack of buying nor the presence of selling is heartening. But the selling simply isn't sufficiently substantial to be of much use as a signal.

Does Potbelly 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. We usually like to see fairly high levels of insider ownership. Potbelly insiders own about US$22m worth of shares. That equates to 17% of the company. 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 Potbelly Tell Us?

While there has not been any insider buying in the last three months, there has been selling. But given the selling was modest, we're not worried. But insiders have shown more of an appetite for the stock, over the last year. Insiders do have a stake in Potbelly and their transactions don't cause us concern. While we like knowing 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. Be aware that Potbelly is showing 4 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...

But note: Potbelly may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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, but not derivative transactions.

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This article by Simply Wall St is general in nature. 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.
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