Insiders At Flex Sold US$42m In Stock, Alluding To Potential Weakness

Over the past year, many Flex Ltd. (NASDAQ:FLEX) insiders sold a significant stake in the company which may have piqued investors' interest. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, if numerous insiders are selling, shareholders should investigate more.

While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.

Check out our latest analysis for Flex

The Last 12 Months Of Insider Transactions At Flex

Over the last year, we can see that the biggest insider sale was by the insider, Paul Lundstrom, for US$6.9m worth of shares, at about US$32.84 per share. That means that even when the share price was below the current price of US$42.39, an insider wanted to cash in some shares. 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. 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 53% of Paul Lundstrom's stake.

Insiders in Flex didn't buy any shares in the last year. You can see a visual depiction of insider transactions (by companies and individuals) 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!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Flex Insiders Are Selling The Stock

The last three months saw significant insider selling at Flex. In total, insiders dumped US$793k 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.

Does Flex Boast High Insider Ownership?

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. Insiders own 0.6% of Flex shares, worth about US$99m. 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 Flex Insiders?

Insiders sold Flex shares recently, but they didn't buy any. And there weren't any purchases to give us comfort, over the last year. On the plus side, Flex makes money, and is growing profits. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. So we'd only buy after careful consideration. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that Flex has 2 warning signs and it would be unwise to ignore them.

But note: Flex 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.