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We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Inter Parfums, Inc. (NASDAQ:IPAR).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We don’t think shareholders should simply follow insider transactions. 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.’
The Last 12 Months Of Insider Transactions At Inter Parfums
Over the last year, we can see that the biggest insider sale was by the Chairman, Jean Madar, for US$3.5m worth of shares, at about US$67.65 per share. So we know that an insider sold shares at around the present share price of US$64.65. While we don’t usually like to see insider selling, it’s more concerning if the sales take price at a lower price. We note that this sale took place at around the current price, so it isn’t a major concern, though it’s hardly a good sign. Jean Madar was the only individual insider to sell shares in the last twelve months.
Jean Madar sold a total of 78207 shares over the year at an average price of US$67.25. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
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. Inter Parfums insiders own about US$900m worth of shares (which is 44% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About Inter Parfums Insiders?
An insider hasn’t bought Inter Parfums stock in the last three months, but there was some selling. And even if we look to the last year, we didn’t see any purchases. On the plus side, Inter Parfums makes money, and is growing profits. 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. 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.
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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.