We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we’ll take a look at whether insiders have been buying or selling shares in MGP Ingredients, Inc. (NASDAQ:MGPI).
Do Insider Transactions Matter?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
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. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
The Last 12 Months Of Insider Transactions At MGP Ingredients
Over the last year, we can see that the biggest insider sale was by VP & Chief Administrative Officer David Rindom for US$4.9m worth of shares, at about US$88.33 per share. So what is clear is that an insider saw fit to sell at around the current price of US$78.73. They could have a variety of motivations for selling, but it’s still not particularly encouraging to see. We generally tread carefully if insiders have been selling on market, even if they sold slightly above the current price.
Happily, we note that in the last year insiders paid US$727k for 10.43k shares. But they sold 107.34k for US$9.4m. In total, MGP Ingredients insiders sold more than they bought over the last year. The average sell price was around US$87.61. We don’t gain confidence from insider selling below the recent share price. Of course, the sales could be motivated for a multitude of reasons, so we shouldn’t jump to conclusions. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
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Insiders at MGP Ingredients Have Sold Stock Recently
Over the last three months, we’ve seen significant insider selling at MGP Ingredients. In total, insiders sold US$531k 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 directors think that the shares are a bargain.
Insider Ownership of MGP Ingredients
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that MGP Ingredients insiders own 7.1% of the company, worth about US$95m. 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 Does This Data Suggest About MGP Ingredients Insiders?
Insiders sold stock recently, but they haven’t been buying. And our longer term analysis of insider transactions didn’t bring confidence, either. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. We’d think twice before buying! If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.