Many Etsy, Inc. (NASDAQ:ETSY) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. When evaluating insider transactions, knowing whether insiders are buying versus if they selling is usually more beneficial, as the latter can be open to many interpretations. However, shareholders should take a deeper look if several insiders are selling stock over a specific time period.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.
In the last twelve months, the biggest single sale by an insider was when the Independent Chairman, Frederick Wilson, sold US$1.7m worth of shares at a price of US$100 per share. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$66.68. So it may not shed much light on insider confidence at current levels.
Etsy insiders didn't buy any shares over the last year. 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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
The last three months saw some Etsy insider selling. Independent Director Marla Blow only netted US$44k selling shares, in that period. It's not great to see insider selling, nor the lack of recent buyers. But the selling simply isn't sufficiently substantial to be of much use as a signal.
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. Etsy insiders own about US$65m worth of shares. That equates to 0.8% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
While there has not been any insider buying in the last three months, there has been selling. But the sales were small, so we're not concerned. We're a little cautious about the insider selling at Etsy. The modest level of insider ownership is, at least, some comfort. 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. Our analysis shows 2 warning signs for Etsy (1 is a bit unpleasant!) and we strongly recommend you look at these before investing.
But note: Etsy 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.