We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 shareholders might well want to know whether insiders have been buying or selling shares in Chemed Corporation (NYSE:CHE).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Colombia 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’.
See our latest analysis for Chemed
The Last 12 Months Of Insider Transactions At Chemed
Over the last year, we can see that the biggest insider sale was by CEO, President & Director Kevin McNamara for US$6.1m worth of shares, at about US$323 per share. So what is clear is that an insider saw fit to sell at around the current price of US$267. They might be selling for a variety of reasons, but it’s hard to argue this is a bullish sign. Arguably, insider selling at around current prices should give us reason to reflect on whether the stock is fully valued at the moment.
In total, Chemed insiders sold more than they bought over the last year. The sellers received a price of around US$309, on average. We don’t gain much confidence from insider selling near the recent share price. Since insiders sell for many reasons, we wouldn’t put too much weight on it. You can see a visual depiction of insider transactions over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Chemed Insiders Are Selling The Stock
Over the last three months, we’ve seen significant insider selling at Chemed. In total, insiders dumped US$5.4m 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.
Does Chemed Boast High Insider Ownership?
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Chemed insiders own about US$103m worth of shares (which is 2.4% 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 Does This Data Suggest About Chemed Insiders?
Insiders haven’t bought Chemed stock in the last three months, but there was some selling. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. But since Chemed is profitable and growing, we’re not too worried by this. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn’t make us feel confident about the company. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Chemed.
Of course Chemed may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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 editorial-team@simplywallst.com.