The fact that multiple Federal Signal Corporation (NYSE:FSS) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. 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.
Federal Signal Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Independent Non-Executive Chairman, Dennis Martin, for US$3.1m worth of shares, at about US$61.47 per share. That means that an insider was selling shares at slightly below the current price (US$78.28). 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. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 8.7% of Dennis Martin's holding.
Federal Signal insiders didn't buy any shares over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like Federal Signal better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Does Federal Signal 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. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Federal Signal insiders own 2.4% of the company, worth about US$113m. 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 Federal Signal Tell Us?
It doesn't really mean much that no insider has traded Federal Signal shares in the last quarter. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Federal Signal insiders selling. Therefore, you should definitely take a look at this FREE report showing analyst forecasts for Federal Signal.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.