Should You Review Recent Insider Transactions At The Estée Lauder Companies Inc. (NYSE:EL)?

By
Simply Wall St
Published
May 05, 2021
NYSE:EL

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 we'll take a look at whether insiders have been buying or selling shares in The Estée Lauder Companies Inc. (NYSE:EL).

What Is Insider Selling?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. 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. 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'.

Check out our latest analysis for Estée Lauder Companies

The Last 12 Months Of Insider Transactions At Estée Lauder Companies

Over the last year, we can see that the biggest insider sale was by the Group President of International, Cedric Prouve, for US$10m worth of shares, at about US$253 per share. That means that even when the share price was below the current price of US$302, an insider wanted to cash in some shares. 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. It is worth noting that this sale was only 15% of Cedric Prouve's holding.

Estée Lauder Companies insiders didn't buy any shares over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
NYSE:EL Insider Trading Volume May 5th 2021

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Estée Lauder Companies Insiders Are Selling The Stock

The last quarter saw substantial insider selling of Estée Lauder Companies shares. Specifically, insiders ditched US$4.7m 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.

Insider Ownership

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. Estée Lauder Companies insiders own about US$13b worth of shares (which is 12% 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 Estée Lauder Companies Insiders?

Insiders sold Estée Lauder Companies shares recently, but they didn't buy any. Looking to the last twelve months, our data doesn't show any insider buying. But since Estée Lauder Companies is profitable and growing, we're not too worried by this. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Estée Lauder Companies. Every company has risks, and we've spotted 2 warning signs for Estée Lauder Companies you should know about.

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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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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