We often see insiders buying up shares in companies that perform well over the long term. 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 Synchrony Financial (NYSE:SYF).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Synchrony Financial Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Independent Director Fernando Aguirre for US$253k worth of shares, at about US$16.55 per share. We do like to see buying, but this purchase was made at well below the current price of US$36.63. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
While Synchrony Financial insiders bought shares during the last year, they didn't sell. Their average price was about US$19.05. It is certainly positive to see that insiders have invested their own money in the company. But we must note that the investments were made at well below today's share price. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Synchrony Financial is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of Synchrony Financial
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. It appears that Synchrony Financial insiders own 0.4% of the company, worth about US$75m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Do The Synchrony Financial Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Synchrony Financial shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in Synchrony Financial and we see no evidence to suggest they are worried about the future. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. In terms of investment risks, we've identified 3 warning signs with Synchrony Financial and understanding them should be part of your investment process.
Of course Synchrony Financial 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, but not derivative transactions.
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What are the risks and opportunities for Synchrony Financial?
Trading at 42.4% below our estimate of its fair value
Revenue is forecast to grow 16.65% per year
Earnings are forecast to decline by an average of 14.9% per year for the next 3 years
Significant insider selling over the past 3 months
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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