We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Workday, Inc. (NASDAQ:WDAY).
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, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.
Workday Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Executive VP, Richard Sauer, sold US$1.1m worth of shares at a price of US$225 per share. That means that an insider was selling shares at slightly below the current price (US$253). 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. This single sale was just 46% of Richard Sauer's stake.
In the last year Workday insiders didn't buy any company stock. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Workday Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Workday shares. In total, Executive VP Richard Sauer sold US$206k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. It's great to see that Workday insiders own 24% of the company, worth about US$14b. 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 Workday Insider Transactions Indicate?
An insider sold stock recently, but they haven't been buying. And there weren't any purchases to give us comfort, over the last year. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. 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, Workday has 4 warning signs (and 1 which is a bit concerning) we think you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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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