Vital Farms Insiders Sell US$11m Of Stock, Possibly Signalling Caution

Over the past year, many Vital Farms, Inc. (NASDAQ:VITL) insiders sold a significant stake in the company which may have piqued investors' interest. 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.

Check out our latest analysis for Vital Farms

The Last 12 Months Of Insider Transactions At Vital Farms

Over the last year, we can see that the biggest insider sale was by the Founder & Executive Chairman, Matthew O'Hayer, for US$4.3m worth of shares, at about US$21.62 per share. That means that an insider was selling shares at slightly below the current price (US$32.43). 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. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 2.6% of Matthew O'Hayer's holding.

Vital Farms insiders didn't buy any shares over 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!

I will like Vital Farms 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.

Does Vital Farms Boast High Insider Ownership?

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's great to see that Vital Farms insiders own 29% of the company, worth about US$395m. 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 Vital Farms Tell Us?

The fact that there have been no Vital Farms insider transactions recently certainly doesn't bother us. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Vital Farms insiders selling. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Vital Farms. While conducting our analysis, we found that Vital Farms has 1 warning sign and it would be unwise to ignore this.

Of course Vital Farms 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.