Should You Be Worried About Insider Transactions At Cirrus Logic, Inc. (NASDAQ:CRUS)?

We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So we’ll take a look at whether insiders have been buying or selling shares in Cirrus Logic, Inc. (NASDAQ:CRUS).

What Is Insider Selling?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. 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.

Check out our latest analysis for Cirrus Logic

The Last 12 Months Of Insider Transactions At Cirrus Logic

In the last twelve months, the biggest single sale by an insider was when the Independent Director, John Carter, sold US$881k worth of shares at a price of US$70.39 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$80.70. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. 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 47% of John Carter’s holding.

Insiders in Cirrus Logic didn’t buy any shares in the last year. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

NasdaqGS:CRUS Recent Insider Trading, February 14th 2020
NasdaqGS:CRUS Recent Insider Trading, February 14th 2020

I will like Cirrus Logic better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Insiders at Cirrus Logic Have Sold Stock Recently

Over the last three months, we’ve seen significant insider selling at Cirrus Logic. In total, Senior Vice President of Supply Chain Scott Anderson sold US$464k 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

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 appears that Cirrus Logic insiders own 0.7% of the company, worth about US$35m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Does This Data Suggest About Cirrus Logic Insiders?

An insider sold stock recently, but they haven’t been buying. Looking to the last twelve months, our data doesn’t show any insider buying. But since Cirrus Logic is profitable and growing, we’re not too worried by this. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. We’d think twice before buying! Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Cirrus Logic.

But note: Cirrus Logic 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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