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 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, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

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The Last 12 Months Of Insider Transactions At Lithia Motors

The CEO, President & Director, Bryan DeBoer, made the biggest insider sale in the last 12 months. That single transaction was for US$7.2m worth of shares at a price of US$400 each. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$272. So it is hard to draw any strong conclusion from it.

In the last year Lithia Motors insiders didn't buy any company stock. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

View our latest analysis for Lithia Motors

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).

Insiders At Lithia Motors Have Sold Stock Recently

Over the last three months, we've seen significant insider selling at Lithia Motors. In total, insiders sold US$434k 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 Lithia Motors Boast High Insider Ownership?

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Lithia Motors insiders own 1.5% of the company, worth about US$107m. 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 Does This Data Suggest About Lithia Motors Insiders?

Insiders sold Lithia Motors shares recently, but they didn't buy any. And there weren't any purchases to give us comfort, over the last year. It is good to see high insider ownership, but the insider selling leaves us cautious. 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 Lithia Motors (1 is significant!) that we believe deserve your full attention.

Of course Lithia Motors may not be the best stock to buy. So you may wish to see this free collection of high quality 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 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.