It is not uncommon to see companies perform well in the years after insiders buy shares. 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 shareholders might well want to know whether insiders have been buying or selling shares in Trupanion, Inc. (NASDAQ:TRUP).
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
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 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'.
The Last 12 Months Of Insider Transactions At Trupanion
The Independent Chairman, Murray Low, made the biggest insider sale in the last 12 months. That single transaction was for US$2.9m worth of shares at a price of US$80.54 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$90.17. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 21% of Murray Low's stake.
In total, Trupanion insiders sold more than they bought over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like Trupanion better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at Trupanion Have Bought Stock Recently
It's good to see that Trupanion insiders have made notable investments in the company's shares. Independent Director Robin Ferracone spent US$1.4m on stock, and there wasn't any selling. This could be interpreted as suggesting a positive outlook.
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Trupanion insiders own about US$216m worth of shares (which is 6.0% 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 Do The Trupanion Insider Transactions Indicate?
The recent insider purchase is heartening. However, the longer term transactions are not so encouraging. Overall, we'd prefer see a more sustained buying from directors, but with a significant insider holding and more recent purchases, Trupanion insiders are reasonably well aligned, and optimistic for the future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Trupanion. For example - Trupanion has 2 warning signs we think you should be aware of.
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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