Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we’ll take a look at whether insiders have been buying or selling shares in RingCentral, Inc. (NYSE:RNG).
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 on the market. However, rules govern insider transactions, and certain disclosures are required.
We don’t think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
See our latest analysis for RingCentral
The Last 12 Months Of Insider Transactions At RingCentral
Chief Strategy Officer Praful Shah made the biggest insider sale in the last 12 months. That single transaction was for US$525k worth of shares at a price of US$95.05 each. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$106. While their view may have changed since they sold, this isn’t a particularly bullish sign. As a general rule we consider it to be discouraging when insiders are selling below the current price. Please note, however, that this single sale was just 1.9% of Praful Shah’s stake.
In the last twelve months insiders netted US$1.9m for 23.08k shares sold. All up, insiders sold more shares in RingCentral than they bought, over the last year. The average sell price was around US$80.40. It’s not particularly great to see insiders were selling shares around current prices. Since insiders sell for many reasons, we wouldn’t put too much weight on it. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at RingCentral Have Sold Stock Recently
Over the last three months, we’ve seen significant insider selling at RingCentral. In total, insiders sold US$440k worth of shares in that time, and we didn’t record any purchases whatsoever. Overall this makes us a bit cautious, but it’s not the be all and end all.
Insider Ownership of RingCentral
For a common shareholder, it is worth checking how many shares are held by company 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 RingCentral insiders own 14% of the company, worth about US$1.1b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At RingCentral Tell Us?
Insiders sold stock recently, but they haven’t been buying. And even if we look to the last year, we didn’t see any purchases. It is good to see high insider ownership, but the insider selling leaves us cautious. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for RingCentral.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.