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 FARO Technologies, Inc. (NASDAQ:FARO).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 it is perfectly logical to keep tabs on what insiders are doing. For example, a Colombia 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’.
FARO Technologies Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by Co-Founder Simon Raab for US$1.0m worth of shares, at about US$68.00 per share. That is hardly a positive sign, even though it took place above the latest price (US$40.00). So it is hard to draw any strong conclusion from it.
In the last twelve months insiders netted US$3.2m for 47.96k shares sold. In total, FARO Technologies insiders sold more than they bought over the last year. The average sell price was around US$66.83. It is certainly not great to see that insiders have sold shares in the company. But the selling was at much higher prices than the current share price (US$40.00), so it probably doesn’t tell us a lot about the value on offer today. You can see a visual depiction of insider transactions over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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Does FARO Technologies Boast High Insider Ownership?
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 FARO Technologies insiders own 1.6% of the company, worth about US$11m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About FARO Technologies Insiders?
It doesn’t really mean much that no insider has traded FARO Technologies shares in the last quarter. We don’t take much encouragement from the transactions by FARO Technologies insiders. The modest level of insider ownership is, at least, some comfort. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
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 firstname.lastname@example.org.