Insider Buyers At SmartRent Likely Disappointed With 12% Slide

The recent 12% drop in SmartRent, Inc.'s (NYSE:SMRT) stock could come as a blow to insiders who purchased US$594.8k worth of stock at an average buy price of US$1.46 over the past 12 months. Insiders invest with the hopes of seeing their money grow in value over time. However, as a result of recent losses, their initial investment is now only worth US$457.0k, which is not what they expected.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

Check out our latest analysis for SmartRent

The Last 12 Months Of Insider Transactions At SmartRent

Notably, that recent purchase by John Dorman is the biggest insider purchase of SmartRent shares that we've seen in the last year. That means that an insider was happy to buy shares at above the current price of US$1.12. It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

In the last twelve months SmartRent insiders were buying shares, but not selling. The average buy price was around US$1.46. This is nice to see since it implies that insiders might see value around current prices. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

SmartRent Insiders Bought Stock Recently

Over the last three months, we've seen significant insider buying at SmartRent. In total, insiders bought US$162k worth of shares in that time, and we didn't record any sales whatsoever. This makes one think the business has some good points.

Insider Ownership Of SmartRent

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. It appears that SmartRent insiders own 9.6% of the company, worth about US$21m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

So What Do The SmartRent Insider Transactions Indicate?

The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. But we don't feel the same about the fact the company is making losses. Given that insiders also own a fair bit of SmartRent we think they are probably pretty confident of a bright future. 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 1 warning sign for SmartRent you should know about.

But note: SmartRent 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.