Over the past year, many Advanced Drainage Systems, Inc. (NYSE:WMS) 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, 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, logic dictates you should pay some attention to whether insiders are buying or selling shares.
The Last 12 Months Of Insider Transactions At Advanced Drainage Systems
In the last twelve months, the biggest single sale by an insider was when the Executive Vice President of Sales, Michael Huebert, sold US$1.9m worth of shares at a price of US$138 per share. That means that an insider was selling shares at slightly below the current price (US$171). We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. 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 21% of Michael Huebert's stake.
Advanced Drainage Systems insiders didn't buy any shares over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
NYSE:WMS Insider Trading Volume April 7th 2024
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Advanced Drainage Systems Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Advanced Drainage Systems shares. Specifically, insiders ditched US$4.8m 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 Advanced Drainage Systems Boast High 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. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Advanced Drainage Systems insiders own 1.4% of the company, worth about US$186m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Advanced Drainage Systems Tell Us?
Insiders sold Advanced Drainage Systems shares recently, but they didn't buy any. And even if we look at the last year, we didn't see any purchases. But it is good to see that Advanced Drainage Systems is growing earnings. 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 while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. For example - Advanced Drainage Systems has 2 warning signs we think you should be aware of.
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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.