Commercial Metals Company (NYSE:CMC) insiders sold US$5.5m worth of stock suggesting impending weakness.

By
Simply Wall St
Published
February 18, 2022
NYSE:CMC
Source: Shutterstock

The fact that multiple Commercial Metals Company (NYSE:CMC) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for Commercial Metals

Commercial Metals Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the Chairman, Barbara Smith, sold US$1.5m worth of shares at a price of US$30.84 per share. That means that an insider was selling shares at slightly below the current price (US$36.21). When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 10% of Barbara Smith's stake.

All up, insiders sold more shares in Commercial Metals than they bought, 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:CMC Insider Trading Volume February 18th 2022

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Insider Ownership of Commercial Metals

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. Commercial Metals insiders own about US$60m worth of shares. That equates to 1.4% 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.

So What Do The Commercial Metals Insider Transactions Indicate?

It doesn't really mean much that no insider has traded Commercial Metals shares in the last quarter. We don't take much encouragement from the transactions by Commercial Metals insiders. But we do like the fact that insiders own a fair chunk of the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Commercial Metals. You'd be interested to know, that we found 1 warning sign for Commercial Metals and we suggest you have a look.

Of course Commercial Metals may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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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