The recent 9.5% drop in Smartsheet Inc.'s (NYSE:SMAR) stock could come as a blow to insiders who purchased US$11m worth of stock at an average buy price of US$63.05 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$6.0m, which is not what they expected.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Check out our latest analysis for Smartsheet

The Last 12 Months Of Insider Transactions At Smartsheet

The Independent Director James White made the biggest insider purchase in the last 12 months. That single transaction was for US$9.5m worth of shares at a price of US$63.07 each. That means that even when the share price was higher than US$34.29 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

Happily, we note that in the last year insiders paid US$11m for 176.43k shares. But insiders sold 47.08k shares worth US$3.1m. Overall, Smartsheet insiders were net buyers during the last year. 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!

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

Smartsheet Insiders Are Selling The Stock

The last three months saw significant insider selling at Smartsheet. In total, Chief Legal Officer & Secretary Jolene Marshall sold US$325k 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 insiders think that the shares are a bargain.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Smartsheet insiders own 3.4% of the company, worth about US$153m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

What Might The Insider Transactions At Smartsheet Tell Us?

An insider hasn't bought Smartsheet stock in the last three months, but there was some selling. But we take heart from prior transactions. On top of that, insiders own a significant portion of the company. So we're happy to look past recent trading. 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. Be aware that Smartsheet is showing 4 warning signs in our investment analysis, and 1 of those is a bit concerning...

But note: Smartsheet 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.

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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.