O'Reilly Automotive, Inc.'s (NASDAQ:ORLY) stock dropped 9.9% this week, offering solace to those who sold earlier in the year

By
Simply Wall St
Published
May 23, 2022
NasdaqGS:ORLY
Source: Shutterstock

Despite the fact that O'Reilly Automotive, Inc.'s (NASDAQ:ORLY) value has dropped 9.9% in the last week insiders who sold US$58m worth of stock in the past 12 months have had less success. Insiders might have been better off holding onto their shares, given that the average selling price of US$565 is still below the current share price.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for O'Reilly Automotive

The Last 12 Months Of Insider Transactions At O'Reilly Automotive

Over the last year, we can see that the biggest insider sale was by the Executive Vice Chairman, David O'Reilly, for US$20m worth of shares, at about US$534 per share. That means that an insider was selling shares at slightly below the current price (US$573). 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. 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 8.3% of David O'Reilly's stake.

In total, O'Reilly Automotive 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!

insider-trading-volume
NasdaqGS:ORLY Insider Trading Volume May 23rd 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

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It's great to see that O'Reilly Automotive insiders own 1.1% of the company, worth about US$429m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The O'Reilly Automotive Insider Transactions Indicate?

There haven't been any insider transactions in the last three months -- that doesn't mean much. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the O'Reilly Automotive insiders selling. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. When we did our research, we found 3 warning signs for O'Reilly Automotive (1 is a bit concerning!) that we believe deserve your full attention.

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.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.