We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So we’ll take a look at whether insiders have been buying or selling shares in Floor & Decor Holdings, Inc. (NYSE:FND).
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year’.
Check out our latest analysis for Floor & Decor Holdings
The Last 12 Months Of Insider Transactions At Floor & Decor Holdings
In the last twelve months, the biggest single sale by an insider was when the Vice Chairman of the Board, George West, sold US$12m worth of shares at a price of US$44.55 per share. That means that even when the share price was below the current price of US$90.96, an insider wanted to cash in some shares. 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don’t know for sure what they think of the stock price. It is worth noting that this sale was only 16% of George West’s holding.
Over the last year we saw more insider selling of Floor & Decor Holdings shares, than buying. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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Does Floor & Decor Holdings 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. A high insider ownership often makes company leadership more mindful of shareholder interests. Floor & Decor Holdings insiders own 2.5% of the company, currently worth about US$253m based on the recent share price. 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 Does This Data Suggest About Floor & Decor Holdings Insiders?
It doesn’t really mean much that no insider has traded Floor & Decor Holdings shares in the last quarter. It’s heartening that insiders own plenty of stock, but we’d like to see more insider buying, since the last year of Floor & Decor Holdings insider transactions don’t fill us with confidence. So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. While conducting our analysis, we found that Floor & Decor Holdings has 1 warning sign and it would be unwise to ignore this.
Of course Floor & Decor Holdings 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, but not derivative transactions.
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This article by Simply Wall St is general in nature. 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.
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