Lifeway Foods Insiders Sell US$6.5m Of Stock, Possibly Signalling Caution

Over the past year, many Lifeway Foods, Inc. (NASDAQ:LWAY) insiders sold a significant stake in the company which may have piqued investors' interest. When evaluating insider transactions, knowing whether insiders are buying versus if they selling is usually more beneficial, as the latter can be open to many interpretations. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Check out our latest analysis for Lifeway Foods

Lifeway Foods Insider Transactions Over The Last Year

In fact, the recent sale by insider Ludmila Smolyansky was not their only sale of Lifeway Foods shares this year. Earlier in the year, they fetched US$21.64 per share in a -US$741k sale. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$16.90. So it is hard to draw any strong conclusion from it.

Insiders in Lifeway Foods didn't buy any shares in the last year. 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!

For those who like to find hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.

Lifeway Foods Insiders Are Selling The Stock

Over the last three months, we've seen significant insider selling at Lifeway Foods. Specifically, insiders ditched US$4.4m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Insider Ownership Of Lifeway Foods

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Lifeway Foods insiders own 39% of the company, worth about US$106m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

What Might The Insider Transactions At Lifeway Foods Tell Us?

Insiders sold Lifeway Foods shares recently, but they didn't buy any. And even if we look at the last year, we didn't see any purchases. On the plus side, Lifeway Foods makes money, and is growing profits. 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. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 2 warning signs for Lifeway Foods you should be aware of.

But note: Lifeway Foods 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.