The fact that multiple Domino's Pizza, Inc. (NYSE:DPZ) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. Knowing whether insiders are buying is usually more helpful when evaluating insider transactions, as insider selling can have various explanations. However, if numerous insiders are selling, shareholders should investigate more.
While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.
View our latest analysis for Domino's Pizza
The Last 12 Months Of Insider Transactions At Domino's Pizza
In the last twelve months, the biggest single sale by an insider was when the Independent Director, Andrew Balson, sold US$2.0m worth of shares at a price of US$399 per share. So it's clear an insider wanted to take some cash off the table, even slightly below the current price of US$400. 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 8.7% of Andrew Balson's holding.
In total, Domino's Pizza insiders sold more than they bought over the last year. 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!
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Insiders At Domino's Pizza Have Sold Stock Recently
Over the last three months, we've seen significant insider selling at Domino's Pizza. Specifically, Independent Director C. Andrew Ballard ditched US$150k 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 Domino's Pizza Boast High Insider Ownership?
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Domino's Pizza insiders own about US$70m worth of shares. That equates to 0.5% 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.
What Might The Insider Transactions At Domino's Pizza Tell Us?
An insider hasn't bought Domino's Pizza stock in the last three months, but there was some selling. And our longer term analysis of insider transactions didn't bring confidence, either. On the plus side, Domino's Pizza makes money, and is growing profits. Insiders own shares, but we're still pretty cautious, given the history of sales. We're in no rush to buy! While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. While conducting our analysis, we found that Domino's Pizza has 2 warning signs and it would be unwise to ignore these.
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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.