Read This Before Buying Digi International Inc. (NASDAQ:DGII) Shares

By
Simply Wall St
Published
February 13, 2021
NasdaqGS:DGII

We often see insiders buying up shares in companies that perform well over the long term. 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 Digi International Inc. (NASDAQ:DGII).

What Is Insider Buying?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.

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 Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

Check out our latest analysis for Digi International

Digi International Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the VP of Corporate Development, David Sampsell, for US$304k worth of shares, at about US$17.47 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$24.37. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 31% of David Sampsell's holding.

Insiders in Digi International didn't buy any shares in the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

insider-trading-volume
NasdaqGS:DGII Insider Trading Volume February 13th 2021

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Digi International Insiders Are Selling The Stock

The last three months saw significant insider selling at Digi International. In total, insiders dumped US$649k 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 Digi International

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 2.1% of Digi International shares, worth about US$15m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Does This Data Suggest About Digi International Insiders?

Insiders sold Digi International shares recently, but they didn't buy any. Looking to the last twelve months, our data doesn't show any insider buying. On the plus side, Digi International makes money, and is growing profits. Insiders own shares, but we're still pretty cautious, given the history of sales. So we'd only buy after careful consideration. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Digi International. While conducting our analysis, we found that Digi International has 4 warning signs and it would be unwise to ignore these.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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, but not derivative transactions.

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This article by Simply Wall St is general in nature. 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.
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