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Possible Bearish Signals With Cogent Communications Holdings Insiders Disposing Stock

Simply Wall St ·  11/29/2023 21:03

Over the past year, many Cogent Communications Holdings, Inc. (NASDAQ:CCOI) insiders sold a significant stake in the company which may have piqued investors' interest. Knowing whether insiders are buying is usually more helpful when evaluating insider transactions, as insider selling can have various explanations. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for Cogent Communications Holdings

Cogent Communications Holdings Insider Transactions Over The Last Year

The Founder, David Schaeffer, made the biggest insider sale in the last 12 months. That single transaction was for US$4.7m worth of shares at a price of US$62.44 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$64.18. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. This single sale was just 1.5% of David Schaeffer's stake.

In the last year Cogent Communications Holdings 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!

insider-trading-volume
NasdaqGS:CCOI Insider Trading Volume November 29th 2023

I will like Cogent Communications Holdings better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Insiders At Cogent Communications Holdings Have Sold Stock Recently

The last three months saw significant insider selling at Cogent Communications Holdings. In total, insiders dumped US$12m 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

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. Cogent Communications Holdings insiders own about US$346m worth of shares (which is 11% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Does This Data Suggest About Cogent Communications Holdings Insiders?

Insiders sold Cogent Communications Holdings shares recently, but they didn't buy any. And there weren't any purchases to give us comfort, over the last year. On the plus side, Cogent Communications Holdings makes money, and is growing profits. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example, Cogent Communications Holdings has 5 warning signs (and 3 which are potentially serious) we think you should know about.

But note: Cogent Communications Holdings 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.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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