Commercial Metals Insiders Sell US$17m Of Stock, Possibly Signalling Caution

In the last year, many Commercial Metals Company (NYSE:CMC) insiders sold a substantial stake in the company which may have sparked shareholders' attention. When evaluating insider transactions, knowing whether insiders are buying versus if they selling is usually more beneficial, as the latter can be open to many interpretations. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.

View our latest analysis for Commercial Metals

The Last 12 Months Of Insider Transactions At Commercial Metals

Over the last year, we can see that the biggest insider sale was by the Executive Chairman of the Board, Barbara Smith, for US$7.1m worth of shares, at about US$49.89 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$53.48. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. 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 26% of Barbara Smith's holding.

Over the last year we saw more insider selling of Commercial Metals shares, than buying. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

I will like Commercial Metals 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 Commercial Metals Have Sold Stock Recently

The last three months saw significant insider selling at Commercial Metals. In total, Executive Chairman of the Board Barbara Smith sold US$6.4m 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.

Does Commercial Metals Boast High Insider Ownership?

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 0.8% of Commercial Metals shares, worth about US$47m. 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 Commercial Metals Tell Us?

An insider sold Commercial Metals shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. So we'd only buy after careful consideration. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 2 warning signs for Commercial Metals you should be aware of, and 1 of these is concerning.

But note: Commercial Metals may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.