We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell Science Applications International Corporation (NYSE:SAIC), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia 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'.
The Last 12 Months Of Insider Transactions At Science Applications International
Over the last year, we can see that the biggest insider purchase was by Executive VP & CFO Prabu Natarajan for US$253k worth of shares, at about US$84.31 per share. So it's clear an insider wanted to buy, at around the current price, which is US$88.62. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. The good news for Science Applications International share holders is that insiders were buying at near the current price.
In the last twelve months insiders purchased 4.45k shares for US$354k. But insiders sold 2.19k shares worth US$218k. In the last twelve months there was more buying than selling by Science Applications International insiders. 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!
Science Applications International is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Science Applications International Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at Science Applications International. Executive VP & CFO Prabu Natarajan spent US$253k on stock, and there wasn't any selling. This makes one think the business has some good points.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Insiders own 0.6% of Science Applications International shares, worth about US$30m. 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 Do The Science Applications International Insider Transactions Indicate?
The recent insider purchase is heartening. And the longer term insider transactions also give us confidence. When combined with notable insider ownership, these factors suggest Science Applications International insiders are well aligned, and that they may think the share price is too low. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Science Applications International. To assist with this, we've discovered 2 warning signs that you should run your eye over to get a better picture of Science Applications International.
But note: Science Applications International 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, but not derivative transactions.
This article by Simply Wall St is general in nature. 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.
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