We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Chegg Inc (NYSE:CHGG), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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 don’t think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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.’
The Last 12 Months Of Insider Transactions At Chegg
Principal Accounting Officer Robin Tomasello made the biggest insider sale in the last 12 months. That single transaction was for US$1.8m worth of shares at a price of US$21.90 each. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$27.95. While their view may have changed since they sold, this isn’t a particularly bullish sign. When an insider sells below the current price, it does tend to make us wonder about the current valuation. Please note, however, that this single sale was just 43.6% of Robin Tomasello’s stake.
Over the last year, we note insiders sold 195.23k shares worth US$4.0m. In total, Chegg insiders sold more than they bought over the last year. The average sell price was around US$20.63. It’s not ideal to see that insiders have sold at around the current price of US$27.95. But we don’t put too much weight on the insider selling, since sellers could have personal reasons. The chart below shows insider transactions over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like Chegg better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Chegg insiders own 5.2% of the company, currently worth about US$167m 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 Do The Chegg Insider Transactions Indicate?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. We don’t take much encouragement from the transactions by Chegg insiders. And usually insiders own more stock in the company, according to our data. Of course, the future is what matters most. So if you are interested in Chegg, you should check out this free report on analyst forecasts for the company.
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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.