It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell Computer Programs and Systems, Inc. (NASDAQ:CPSI), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
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The Last 12 Months Of Insider Transactions At Computer Programs and Systems
Senior Vice President of Sales Troy Rosser made the biggest insider sale in the last 12 months. That single transaction was for US$287k worth of shares at a price of US$30.34 each. That means that an insider was selling shares at around the current price of US$27.05. They could have a variety of motivations for selling, but it’s still not particularly encouraging to see. Arguably, insider selling at around current prices should give us reason to reflect on whether the stock is fully valued at the moment.
Over the last year, we note insiders sold 20.37k shares worth US$619k. All up, insiders sold more shares in Computer Programs and Systems than they bought, over the last year. They sold for an average price of about US$30.38. We don’t gain much confidence from insider selling near the recent share price. But we don’t put too much weight on the insider selling, since sellers could have personal reasons. The chart below shows insider transactions (by 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!
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Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Computer Programs and Systems insiders own about US$18m worth of shares. That equates to 4.8% of the company. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Does This Data Suggest About Computer Programs and Systems Insiders?
It doesn’t really mean much that no insider has traded Computer Programs and Systems shares in the last quarter. We don’t take much encouragement from the transactions by Computer Programs and Systems insiders. But we do like the fact that insiders own a fair chunk of the company. 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.
But note: Computer Programs and Systems 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.