Insiders At Carvana Sold US$62m In Stock, Alluding To Potential Weakness

Many Carvana Co. (NYSE:CVNA) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, if numerous insiders are selling, shareholders should investigate more.

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.

See our latest analysis for Carvana

The Last 12 Months Of Insider Transactions At Carvana

In the last twelve months, the biggest single sale by an insider was when the insider, Ernest Garcia, sold US$14m worth of shares at a price of US$120 per share. That means that even when the share price was below the current price of US$248, an insider wanted to cash in some shares. 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. This single sale was just 13% of Ernest Garcia's stake.

All up, insiders sold more shares in Carvana 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!

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

Carvana Insiders Are Selling The Stock

The last three months saw significant insider selling at Carvana. In total, insiders sold US$18m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Does Carvana 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. We usually like to see fairly high levels of insider ownership. Carvana insiders own about US$1.1b worth of shares (which is 1.8% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

What Might The Insider Transactions At Carvana Tell Us?

Insiders sold Carvana shares recently, but they didn't buy any. Zooming out, the longer term picture doesn't give us much comfort. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Carvana. For instance, we've identified 3 warning signs for Carvana (1 is a bit unpleasant) you should be aware of.

But note: Carvana 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.