Over the past year, many Universal Health Services, Inc. (NYSE:UHS) insiders sold a significant stake in the company which may have piqued investors' interest. 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, if numerous insiders are selling, shareholders should investigate more.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.
The Last 12 Months Of Insider Transactions At Universal Health Services
The Executive VP, Steve Filton, made the biggest insider sale in the last 12 months. That single transaction was for US$4.4m worth of shares at a price of US$177 each. That means that an insider was selling shares at below the current price (US$177). 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 9.8% of Steve Filton's holding.
In total, Universal Health Services insiders sold more than they bought over the last year. 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!
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).
Universal Health Services Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Universal Health Services shares. Specifically, Executive VP Steve Filton ditched US$4.4m 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 Of Universal Health Services
For a common shareholder, it is worth checking how many shares are held by company 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. Universal Health Services insiders own about US$1.5b worth of shares (which is 13% 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.
So What Do The Universal Health Services Insider Transactions Indicate?
An insider hasn't bought Universal Health Services stock in the last three months, but there was some selling. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But it is good to see that Universal Health Services is growing earnings. It is good to see high insider ownership, but the insider selling leaves us cautious. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Universal Health Services. Case in point: We've spotted 2 warning signs for Universal Health Services you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.
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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.