Sleep Number Insider Buyers Pleased With US$539k Return On Investment

Insiders who bought Sleep Number Corporation (NASDAQ:SNBR) in the last 12 months may probably not pay attention to the stock's recent 16% drop. After taking the recent loss into consideration, the US$1.04m worth of stock they bought is now worth US$1.58m, indicating that their investment yielded a positive return.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for Sleep Number

The Last 12 Months Of Insider Transactions At Sleep Number

In the last twelve months, the biggest single purchase by an insider was when insider Stephen Macadam bought US$531k worth of shares at a price of US$12.35 per share. Even though the purchase was made at a significantly lower price than the recent price (US$16.55), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.

Sleep Number insiders may have bought shares in the last year, but they didn't sell any. Their average price was about US$10.90. To my mind it is good that insiders have invested their own money in the company. However, you should keep in mind that they bought when the share price was meaningfully below today's levels. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

Sleep Number is not the only stock insiders are buying. So take a peek at this free list of under-the-radar companies with insider buying.

Sleep Number Insiders Bought Stock Recently

Over the last quarter, Sleep Number insiders have spent a meaningful amount on shares. We can see that insider Stephen Macadam paid US$531k for shares in the company. No-one sold. This is a positive in our book as it implies some confidence.

Insider Ownership

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. Insiders own 4.9% of Sleep Number shares, worth about US$19m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Does This Data Suggest About Sleep Number Insiders?

It's certainly positive to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. When combined with notable insider ownership, these factors suggest Sleep Number insiders are well aligned, and that they may think the share price is too low. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Sleep Number. Be aware that Sleep Number is showing 3 warning signs in our investment analysis, and 2 of those can't be ignored...

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 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.