Don't Ignore The Insider Selling In Red Violet

Anyone interested in Red Violet, Inc. (NASDAQ:RDVT) should probably be aware that a company insider, Daniel McLachlan, recently divested US$462k worth of shares in the company, at an average price of US$46.21 each. However, the silver lining is that the sale only reduced their total holding by 3.1%, so we're hesitant to read anything much into it, on its own.

We've discovered 2 warning signs about Red Violet. View them for free.

The Last 12 Months Of Insider Transactions At Red Violet

Over the last year, we can see that the biggest insider sale was by the insider, Peter Benz, for US$935k worth of shares, at about US$38.00 per share. That means that an insider was selling shares at slightly below the current price (US$49.20). 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 25% of Peter Benz's holding.

Over the last year we saw more insider selling of Red Violet shares, than buying. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

See our latest analysis for Red Violet

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).

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. It appears that Red Violet insiders own 8.7% of the company, worth about US$59m. 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 Red Violet Insiders?

The stark truth for Red Violet is that there has been more insider selling than insider buying in the last three months. Zooming out, the longer term picture doesn't give us much comfort. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We're in no rush to buy! So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. To assist with this, we've discovered 2 warning signs that you should run your eye over to get a better picture of Red Violet.

But note: Red Violet 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.