We often see insiders buying up shares in companies that perform well over the long term. 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 Tenet Healthcare Corporation (NYSE:THC).
What Is Insider Selling?
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 don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia 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'.
Tenet Healthcare Insider Transactions Over The Last Year
The Executive VP, Audrey Andrews, made the biggest insider sale in the last 12 months. That single transaction was for US$915k worth of shares at a price of US$41.44 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$50.06. 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. We note that the biggest single sale was only 30% of Audrey Andrews's holding.
Happily, we note that in the last year insiders paid US$1.3m for 73.03k shares. But insiders sold 30.52k shares worth US$1.3m. In the last twelve months there was more buying than selling by Tenet Healthcare insiders. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Tenet Healthcare is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at Tenet Healthcare Have Sold Stock Recently
The last three months saw significant insider selling at Tenet Healthcare. In total, insiders sold US$1.3m 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.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Tenet Healthcare insiders own about US$79m worth of shares. That equates to 1.5% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Tenet Healthcare Tell Us?
Insiders haven't bought Tenet Healthcare stock in the last three months, but there was some selling. In contrast, they appear keener if you look at the last twelve months. It's good to see insiders are shareholders. So the recent selling doesn't worry us too much. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. You'd be interested to know, that we found 2 warning signs for Tenet Healthcare and we suggest you have a look.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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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What are the risks and opportunities for Tenet Healthcare?
Trading at 23.2% below our estimate of its fair value
Earnings are forecast to grow 15.44% per year
Interest payments are not well covered by earnings
Significant insider selling over the past 3 months
Profit margins (2.9%) are lower than last year (5.5%)
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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