Insiders At Darden Restaurants Sold US$7.0m In Stock, Alluding To Potential Weakness

The fact that multiple Darden Restaurants, Inc. (NYSE:DRI) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. 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, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for Darden Restaurants

The Last 12 Months Of Insider Transactions At Darden Restaurants

The Senior VP & Chief Supply Chain Officer, Douglas Milanes, made the biggest insider sale in the last 12 months. That single transaction was for US$981k worth of shares at a price of US$172 each. That means that an insider was selling shares at slightly below the current price (US$195). 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 60% of Douglas Milanes's holding.

In the last year Darden Restaurants insiders didn't buy any company stock. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

I will like Darden Restaurants better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.

Insiders At Darden Restaurants Have Sold Stock Recently

The last three months saw significant insider selling at Darden Restaurants. In total, insiders dumped US$657k 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.

Does Darden Restaurants 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. I reckon it's a good sign if insiders own a significant number of shares in the company. Darden Restaurants insiders own 0.5% of the company, currently worth about US$106m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Darden Restaurants Tell Us?

Insiders sold stock recently, but they haven't been buying. Looking to the last twelve months, our data doesn't show any insider buying. But since Darden Restaurants is profitable and growing, we're not too worried by this. 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. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Darden Restaurants. You'd be interested to know, that we found 2 warning signs for Darden Restaurants and we suggest you have a look.

Of course Darden Restaurants 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.