share_log

Don't Ignore The Insider Selling In O'Reilly Automotive

Simply Wall St ·  Feb 24 08:21

We wouldn't blame O'Reilly Automotive, Inc. (NASDAQ:ORLY) shareholders if they were a little worried about the fact that David O'Reilly, the Executive Vice Chairman recently netted about US$11m selling shares at an average price of US$1,054. However, that sale only accounted for 3.7% of their holding, so arguably it doesn't say much about their conviction.

O'Reilly Automotive Insider Transactions Over The Last Year

In fact, the recent sale by Executive Vice Chairman David O'Reilly was not their only sale of O'Reilly Automotive shares this year. They previously made an even bigger sale of -US$25m worth of shares at a price of US$932 per share. That means that even when the share price was below the current price of US$1,058, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 8.9% of David O'Reilly's stake.

In the last year O'Reilly Automotive insiders didn't buy any company stock. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
NasdaqGS:ORLY Insider Trading Volume February 24th 2024

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).

Insider Ownership Of O'Reilly Automotive

For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. O'Reilly Automotive insiders own about US$610m worth of shares (which is 1.0% of the company). 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 O'Reilly Automotive Tell Us?

Insiders sold O'Reilly Automotive shares recently, but they didn't buy any. Looking to the last twelve months, our data doesn't show any insider buying. But since O'Reilly Automotive is profitable and growing, we're not too worried by this. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Be aware that O'Reilly Automotive is showing 3 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

Of course O'Reilly Automotive may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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
    Write a comment