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We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Enghouse Systems Limited (TSE:ENGH).
Do Insider Transactions Matter?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
Enghouse Systems Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by Executive Chairman & CEO Stephen Sadler for CA$5.4m worth of shares, at about CA$38.32 per share. So what is clear is that an insider saw fit to sell at around the current price of CA$37.06. They could have a variety of motivations for selling, but it’s still not particularly encouraging to see. We usually pause to reflect on the potential that a stock has a high valuation, if insiders have been selling at around the current price.
In the last twelve months insiders netted CA$31m for 861.40k shares sold. All up, insiders sold more shares in Enghouse Systems than they bought, over the last year. They sold for an average price of about CA$36.54. It’s not ideal to see that insiders have sold at around the current price. Since insiders sell for many reasons, we wouldn’t put too much weight on it. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Enghouse Systems Insiders Are Selling The Stock
The last three months saw significant insider selling at Enghouse Systems. Specifically, Stephen Sadler ditched CA$5.2m 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 directors think that the shares are a bargain.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Enghouse Systems insiders own 19% of the company, currently worth about CA$390m based on the recent share price. 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 Enghouse Systems Insiders?
An insider hasn’t bought Enghouse Systems 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, Enghouse Systems makes money, and is growing profits. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn’t make us feel confident about the company. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Enghouse Systems.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.