Possible Bearish Signals With Lithia Motors Insiders Disposing Stock

The fact that multiple Lithia Motors, Inc. (NYSE:LAD) 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.

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 Lithia Motors

The Last 12 Months Of Insider Transactions At Lithia Motors

Over the last year, we can see that the biggest insider sale was by the CEO, President & Director, Bryan DeBoer, for US$8.1m worth of shares, at about US$313 per share. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The good news is that this large sale was at well above current price of US$264. So it may not tell us anything about how insiders feel about the current share price.

In the last year Lithia Motors 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. 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: insiders have been buying them).

Insiders At Lithia Motors Have Sold Stock Recently

Over the last three months, we've seen a bit of insider selling at Lithia Motors. Independent Director Shauna McIntyre sold just US$40k worth of shares in that time. Neither the lack of buying nor the presence of selling is heartening. But the selling simply isn't sufficiently substantial to be of much use as a signal.

Insider Ownership

Many investors like to check how much of a company is owned by insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Lithia Motors insiders own about US$131m worth of shares (which is 1.8% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Does This Data Suggest About Lithia Motors Insiders?

While there has not been any insider buying in the last three months, there has been selling. But the sales were small, so we're not concerned. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Lithia Motors insiders selling. 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. You'd be interested to know, that we found 1 warning sign for Lithia Motors and we suggest you have a look.

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.