Party City Holdco Inc. (NYSE:PRTY) Insiders Increased Their Holdings

It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we'll take a look at whether insiders have been buying or selling shares in Party City Holdco Inc. (NYSE:PRTY).

Do Insider Transactions Matter?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, such insiders must disclose their trading activities, and not trade on inside information.

Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.

See our latest analysis for Party City Holdco

The Last 12 Months Of Insider Transactions At Party City Holdco

The Vice Chairman, James Harrison, made the biggest insider sale in the last 12 months. That single transaction was for US$693k worth of shares at a price of US$3.08 each. That means that an insider was selling shares at slightly below the current price (US$7.46). 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. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 30% of James Harrison's stake. James Harrison was the only individual insider to sell over the last year.

In the last twelve months insiders purchased 521.91k shares for US$1.2m. But insiders sold 225.00k shares worth US$693k. Overall, Party City Holdco insiders were net buyers during the last year. The average buy price was around US$2.38. 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. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

Party City Holdco is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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. We usually like to see fairly high levels of insider ownership. Insiders own 1.7% of Party City Holdco shares, worth about US$14m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Do The Party City Holdco Insider Transactions Indicate?

The fact that there have been no Party City Holdco insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. Overall we don't see anything to make us think Party City Holdco insiders are doubting the company, and they do own shares. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 3 warning signs with Party City Holdco and understanding these should be part of your investment process.

But note: Party City Holdco 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, but not derivative transactions.

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This article by Simply Wall St is general in nature. 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.
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