PepsiCo Insiders Sell US$12m Of Stock, Possibly Signalling Caution

In the last year, many PepsiCo, Inc. (NASDAQ:PEP) insiders sold a substantial stake in the company which may have sparked shareholders' attention. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, if numerous insiders are selling, shareholders should investigate more.

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.

See our latest analysis for PepsiCo

The Last 12 Months Of Insider Transactions At PepsiCo

Over the last year, we can see that the biggest insider sale was by the insider, Hugh Johnston, for US$8.1m worth of shares, at about US$167 per share. That means that an insider was selling shares at below the current price (US$168). 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 only 33% of Hugh Johnston's holding.

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

I will like PepsiCo 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.

PepsiCo Insiders Are Selling The Stock

The last three months saw significant insider selling at PepsiCo. In total, insiders dumped US$2.2m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.

Insider Ownership

Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. PepsiCo insiders own about US$315m worth of shares (which is 0.1% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Do The PepsiCo Insider Transactions Indicate?

Insiders haven't bought PepsiCo stock in the last three months, but there was some selling. Looking to the last twelve months, our data doesn't show any insider buying. On the plus side, PepsiCo makes money, and is growing profits. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing PepsiCo. Every company has risks, and we've spotted 3 warning signs for PepsiCo you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com