While Lithia Motors, Inc. (NYSE:LAD) shareholders have enjoyed a good week with stock up 12%, they need remain vigilant. Although prices were relatively low, insiders chose to sell US$20m worth of stock in the past 12 months. This could be a sign of impending weakness.
Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.
Check out our latest analysis for Lithia Motors
Lithia Motors Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the CEO, President & Director, Bryan DeBoer, sold US$8.1m worth of shares at a price of US$313 per share. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$266. So it is hard to draw any strong conclusion from it.
In the last year Lithia Motors insiders didn't buy any company stock. 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!
I will like Lithia Motors better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Lithia Motors Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Lithia Motors shares. In total, insiders sold US$1.6m 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.
Does Lithia Motors Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Lithia Motors insiders own 1.7% of the company, worth about US$128m. 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 Lithia Motors Insiders?
Insiders sold stock recently, but they haven't been buying. And even if we look at the last year, we didn't see any purchases. It is good to see high insider ownership, but the insider selling leaves us cautious. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Our analysis shows 2 warning signs for Lithia Motors (1 doesn't sit too well with us!) and we strongly recommend you look at these before investing.
But note: Lithia Motors 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.