Stock Analysis

Possible bearish signals as LKQ Corporation (NASDAQ:LKQ) insiders disposed of US$3.9m worth of stock

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NasdaqGS:LKQ
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Many LKQ Corporation (NASDAQ:LKQ) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. 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 would consider it foolish to ignore insider transactions altogether.

See our latest analysis for LKQ

The Last 12 Months Of Insider Transactions At LKQ

The Chair Emeritus, Joseph Holsten, made the biggest insider sale in the last 12 months. That single transaction was for US$3.8m worth of shares at a price of US$54.58 each. That means that even when the share price was slightly below the current price of US$54.86, 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. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 34% of Joseph Holsten's stake.

In the last year LKQ insiders didn't buy any company stock. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

insider-trading-volume
NasdaqGS:LKQ Insider Trading Volume November 28th 2022

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. LKQ insiders own 0.8% of the company, currently worth about US$117m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

What Might The Insider Transactions At LKQ Tell Us?

The fact that there have been no LKQ insider transactions recently certainly doesn't bother us. While we feel good about high insider ownership of LKQ, we can't say the same about the selling of shares. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. At Simply Wall St, we've found that LKQ has 3 warning signs (1 shouldn't be ignored!) that deserve your attention before going any further with your analysis.

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.

What are the risks and opportunities for LKQ?

LKQ Corporation distributes replacement parts, components, and systems used in the repair and maintenance of vehicles.

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Rewards

  • Trading at 2.9% below our estimate of its fair value

  • Earnings have grown 20.8% per year over the past 5 years

Risks

  • Earnings are forecast to decline by an average of 0.4% per year for the next 3 years

  • Has a high level of debt

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