Insider Buyers At Portillo's Likely Disappointed With 11% Slide

The recent price decline of 11% in Portillo's Inc.'s (NASDAQ:PTLO) stock may have disappointed insiders who bought US$2.54m worth of shares at an average price of US$8.99 in the past 12 months. Insiders buy with the expectation to see their investments rise in value over a period of time. However, recent losses have rendered their above investment worth US$1.70m which is not ideal.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

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The Last 12 Months Of Insider Transactions At Portillo's

The Lead Independent Director Eugene Lee made the biggest insider purchase in the last 12 months. That single transaction was for US$1.0m worth of shares at a price of US$7.68 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$6.00). Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

Portillo's insiders may have bought shares in the last year, but they didn't sell any. The average buy price was around US$8.99. This is nice to see since it implies that insiders might see value around current prices. 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!

Check out our latest analysis for Portillo's

There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insiders At Portillo's Have Bought Stock Recently

It's good to see that Portillo's insiders have made notable investments in the company's shares. Not only was there no selling that we can see, but they collectively bought US$1.6m worth of shares. This is a positive in our book as it implies some confidence.

Insider Ownership Of Portillo's

Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Portillo's insiders own 2.6% of the company, worth about US$12m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Do The Portillo's Insider Transactions Indicate?

It's certainly positive to see the recent insider purchases. And the longer term insider transactions also give us confidence. When combined with notable insider ownership, these factors suggest Portillo's insiders are well aligned, and that they may think the share price is too low. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Portillo's. While conducting our analysis, we found that Portillo's has 1 warning sign and it would be unwise to ignore it.

But note: Portillo's 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 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.