We often see insiders buying up shares in companies that perform well over the long term. 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 shareholders might well want to know whether insiders have been buying or selling shares in Avis Budget Group, Inc. (NASDAQ:CAR).

Do Insider Transactions Matter?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 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'.

See our latest analysis for Avis Budget Group

Avis Budget Group Insider Transactions Over The Last Year

In fact, the recent purchase by Chief Financial Officer Brian Choi was not their only acquisition of Avis Budget Group shares this year. Earlier in the year, they paid US$47.57 per share in a US$1.1m purchase. We do like to see buying, but this purchase was made at well below the current price of US$62.33. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.

Happily, we note that in the last year insiders paid US$2.1m for 59.74k shares. But insiders sold 8.30k shares worth US$519k. Overall, Avis Budget Group insiders were net buyers during the last year. The average buy price was around US$34.53. To my mind it is good that insiders have invested their own money in the company. However, we do note that they were buying at significantly lower prices than today's share price. 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!

Avis Budget Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Avis Budget Group Insiders Bought Stock Recently

At Avis Budget Group,over the last quarter, we have observed quite a lot more insider buying than insider selling. Chief Financial Officer Brian Choi spent US$1.6m on stock. On the other hand, Chief Human Resource Officer & Executive VP Edward Linnen netted US$519k by selling. The buying outweighs the selling, which suggests that insiders may believe the company will do well in the future.

Insider Ownership of Avis Budget Group

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. Avis Budget Group insiders own about US$61m worth of shares. That equates to 1.4% of the company. 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 Does This Data Suggest About Avis Budget Group Insiders?

The recent insider purchase is heartening. And an analysis of the transactions over the last year also gives us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Insiders likely see value in Avis Budget Group shares, given these transactions (along with notable insider ownership of the company). In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Avis Budget Group. Our analysis shows 3 warning signs for Avis Budget Group (1 can't be ignored!) and we strongly recommend you look at them before investing.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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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