Stock Analysis

Did Five Below, Inc. (NASDAQ:FIVE) Insiders Sell Shares?

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NasdaqGS:FIVE
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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 Five Below, Inc. (NASDAQ:FIVE).

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, most countries require that the company discloses such transactions to the market.

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'.

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The Last 12 Months Of Insider Transactions At Five Below

Over the last year, we can see that the biggest insider sale was by the Co-Founder & Non-Executive Chairman, Thomas Vellios, for US$11m worth of shares, at about US$111 per share. That means that an insider was selling shares at slightly below the current price (US$194). 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. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. This single sale was just 16% of Thomas Vellios's stake.

Insiders in Five Below didn't buy any shares in the last year. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
NasdaqGS:FIVE Insider Trading Volume March 3rd 2021

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Five Below Insiders Are Selling The Stock

The last three months saw significant insider selling at Five Below. Specifically, insiders ditched US$6.0m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Does Five Below Boast High Insider Ownership?

Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Five Below insiders own 1.9% of the company, worth about US$211m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Five Below Tell Us?

Insiders sold Five Below shares recently, but they didn't buy any. And there weren't any purchases to give us comfort, over the last year. It is good to see high insider ownership, but the insider selling leaves us cautious. 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 1 warning sign for Five Below you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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What are the risks and opportunities for Five Below?

Five Below, Inc. operates as a specialty value retailer in the United States.

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Rewards

  • Earnings are forecast to grow 17.37% per year

Risks

  • High level of non-cash earnings

  • Significant insider selling over the past 3 months

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