Possible Bearish Signals With Zscaler Insiders Disposing Stock

Over the past year, many Zscaler, Inc. (NASDAQ:ZS) insiders sold a significant stake in the company which may have piqued investors' interest. Knowing whether insiders are buying is usually more helpful when evaluating insider transactions, as insider selling can have various explanations. However, if numerous insiders are selling, shareholders should investigate more.

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.

Check out our latest analysis for Zscaler

Zscaler Insider Transactions Over The Last Year

The insider, Ajay Mangal, made the biggest insider sale in the last 12 months. That single transaction was for US$11m worth of shares at a price of US$198 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$205. 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. This single sale was just 0.2% of Ajay Mangal's stake.

In the last year Zscaler 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!

I will like Zscaler better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.

Zscaler Insiders Are Selling The Stock

The last three months saw significant insider selling at Zscaler. In total, insiders sold US$5.6m 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 Zscaler

Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Zscaler insiders own 38% of the company, worth about US$12b. 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 Zscaler Insider Transactions Indicate?

Insiders sold Zscaler shares recently, but they didn't buy any. 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 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. At Simply Wall St, we found 2 warning signs for Zscaler that deserve your attention before buying any shares.

Of course Zscaler may not be the best stock to buy. So you may wish to see this free collection of high quality 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 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.