Many Commercial Metals Company (NYSE:CMC) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. When evaluating insider transactions, knowing whether insiders are buying versus if they selling is usually more beneficial, as the latter can be open to many interpretations. 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 would consider it foolish to ignore insider transactions altogether.
Commercial Metals Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Executive Chairman of the Board, Barbara Smith, for US$7.1m worth of shares, at about US$49.89 per share. That means that an insider was selling shares at slightly below the current price (US$57.22). 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. We note that the biggest single sale was only 26% of Barbara Smith's holding.
Over the last year we saw more insider selling of Commercial Metals shares, than buying. The chart below shows insider transactions (by companies and individuals) over the last year. 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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Commercial Metals Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Commercial Metals shares. Specifically, insiders ditched US$16m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
Does Commercial Metals Boast High Insider Ownership?
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. Insiders own 0.8% of Commercial Metals shares, worth about US$51m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About Commercial Metals Insiders?
Insiders sold Commercial Metals shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. Insiders own shares, but we're still pretty cautious, given the history of sales. We'd practice some caution before buying! 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. Be aware that Commercial Metals is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored...
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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.