Possible Bearish Signals With Home Depot Insiders Disposing Stock

The fact that multiple The Home Depot, Inc. (NYSE:HD) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. 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, 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, we do think it is perfectly logical to keep tabs on what insiders are doing.

Check out our latest analysis for Home Depot

Home Depot Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the Executive Vice President of Customer Experience, Matthew Carey, sold US$4.0m worth of shares at a price of US$316 per share. So it's clear an insider wanted to take some cash off the table, even slightly below the current price of US$317. 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. 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. It is worth noting that this sale was only 27% of Matthew Carey's holding.

Over the last year we saw more insider selling of Home Depot shares, than buying. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

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Home Depot Insiders Are Selling The Stock

The last three months saw significant insider selling at Home Depot. In total, Executive Vice President of Outside Sales & Service Hector Padilla sold US$366k 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 Home Depot Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Home Depot insiders own 0.08% of the company, worth about US$240m. 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 Home Depot Tell Us?

An insider hasn't bought Home Depot stock in the last three months, but there was some selling. Despite some insider buying, the longer term picture doesn't make us feel much more positive. On the plus side, Home Depot makes money, and is growing profits. It is good to see high insider ownership, but the insider selling leaves us cautious. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. While conducting our analysis, we found that Home Depot has 1 warning sign and it would be unwise to ignore it.

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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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.