Read This Before Buying Addus HomeCare Corporation (NASDAQ:ADUS) Shares

By
Simply Wall St
Published
February 17, 2021
NasdaqGS:ADUS

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 Addus HomeCare Corporation (NASDAQ:ADUS).

What Is Insider Buying?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

Check out our latest analysis for Addus HomeCare

Addus HomeCare Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the CEO, President & Director, R. Allison, sold US$1.3m worth of shares at a price of US$95.06 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$121. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. 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. It is worth noting that this sale was only 21% of R. Allison's holding.

Insiders in Addus HomeCare didn't buy any shares in the last year. 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!

insider-trading-volume
NasdaqGS:ADUS Insider Trading Volume February 17th 2021

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Insider Ownership of Addus HomeCare

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. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 1.5% of Addus HomeCare shares, worth about US$29m. 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 Addus HomeCare Insiders?

It doesn't really mean much that no insider has traded Addus HomeCare shares in the last quarter. Our analysis of Addus HomeCare insider transactions leaves us cautious. But we do like the fact that insiders own a fair chunk of the company. Of course, the future is what matters most. So if you are interested in Addus HomeCare, you should check out this free report on analyst forecasts for the company.

Of course Addus HomeCare 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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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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