Alarm.com Holdings Insiders Sell US$2.3m Of Stock, Possibly Signalling Caution

Quite a few Alarm.com Holdings, Inc. (NASDAQ:ALRM) insiders sold their shares over the past year, which may be a cause for concern. 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, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

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 Alarm.com Holdings

Alarm.com Holdings Insider Transactions Over The Last Year

The CFO & Principal Accounting Officer, Steve Valenzuela, made the biggest insider sale in the last 12 months. That single transaction was for US$446k worth of shares at a price of US$58.48 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$75.13. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. 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. We note that the biggest single sale was 100% of Steve Valenzuela's holding.

In the last year Alarm.com Holdings 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. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

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).

Insider Ownership Of Alarm.com Holdings

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. Alarm.com Holdings insiders own about US$179m worth of shares (which is 4.8% 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 Does This Data Suggest About Alarm.com Holdings Insiders?

It doesn't really mean much that no insider has traded Alarm.com Holdings shares in the last quarter. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Alarm.com Holdings insiders selling. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

But note: Alarm.com Holdings 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.