Possible Bearish Signals With Ambarella Insiders Disposing Stock

Ambarella, Inc. (NASDAQ:AMBA) shareholders might have a reason to worry after multiple insiders sold their shares over the last year. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

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.

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Ambarella Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the Senior VP of Systems & GM of Asia Design Centers, Chi-Hong Ju, sold US$387k worth of shares at a price of US$75.72 per share. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$58.55. So it is hard to draw any strong conclusion from it.

Insiders in Ambarella didn't buy any shares in the last year. 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!

See our latest analysis for Ambarella

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).

Ambarella Insiders Are Selling The Stock

Over the last three months, we've seen significant insider selling at Ambarella. Specifically, insiders ditched US$1.3m 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.

Insider Ownership Of Ambarella

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Ambarella insiders own about US$137m worth of shares (which is 6.0% 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.

So What Do The Ambarella Insider Transactions Indicate?

Insiders sold stock recently, but they haven't been buying. Looking to the last twelve months, our data doesn't show any insider buying. 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. For example - Ambarella has 2 warning signs we think you should be aware of.

But note: Ambarella 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.