Coda Octopus Group Insiders Made A Wise Decision By Selling US$1.7m Worth Of Stock

While Coda Octopus Group, Inc. (NASDAQ:CODA) shareholders have had a good week with the stock up 15%, they shouldn't let their guards down. In spite of the relatively cheap prices, insiders made the decision to sell US$1.7m worth of stock in the last 12 months. This could be a warning indicator of vulnerabilities in the future.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

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The Last 12 Months Of Insider Transactions At Coda Octopus Group

In fact, the recent sale by Niels Sondergaard was the biggest sale of Coda Octopus Group shares made by an insider individual in the last twelve months, according to our records. So it's clear an insider wanted to take some cash off the table, even below the current price of US$9.24. 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. It is worth noting that this sale was only 6.8% of Niels Sondergaard's holding.

Niels Sondergaard divested 206.37k shares over the last 12 months at an average price of US$8.17. 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!

See our latest analysis for Coda Octopus Group

I will like Coda Octopus Group 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.

Insiders At Coda Octopus Group Have Sold Stock Recently

Over the last three months, we've seen significant insider selling at Coda Octopus Group. In total, insider Niels Sondergaard dumped US$1.7m 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.

Insider Ownership Of Coda Octopus Group

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It's great to see that Coda Octopus Group insiders own 42% of the company, worth about US$41m. 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 Coda Octopus Group Insider Transactions Indicate?

An insider hasn't bought Coda Octopus Group stock in the last three months, but there was some selling. And there weren't any purchases to give us comfort, over the last year. On the plus side, Coda Octopus Group makes money, and is growing profits. It is good to see high insider ownership, but the insider selling leaves us cautious. 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. Every company has risks, and we've spotted 2 warning signs for Coda Octopus Group you should know about.

But note: Coda Octopus Group 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.