Many Eaton Corporation plc (NYSE:ETN) insiders ditched their stock over the past year, which may be of interest to the company’s shareholders. Knowing whether insiders are buying is usually more helpful when evaluating insider transactions, as insider selling can have various explanations. 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.
View our latest analysis for Eaton
Eaton Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the President & COO of Electrical Sector, Heath Monesmith, for US$2.2m worth of shares, at about US$221 per share. That means that an insider was selling shares at slightly below the current price (US$331). 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. 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 14% of Heath Monesmith’s holding.
In the last year Eaton insiders didn’t buy any company stock. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
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).
Eaton Insiders Are Selling The Stock
The last three months saw significant insider selling at Eaton. In total, insiders dumped US$3.3m 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.
Insider Ownership
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It’s great to see that Eaton insiders own 0.2% of the company, worth about US$311m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The Eaton Insider Transactions Indicate?
Insiders sold Eaton shares recently, but they didn’t buy any. And there weren’t any purchases to give us comfort, over the last year. On the plus side, Eaton makes money, and is growing profits. The company boasts high insider ownership, but we’re a little hesitant, given the history of share sales. While we like knowing what’s going on with the insider’s ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. For example – Eaton has 1 warning sign we think you should be aware of.
But note: Eaton may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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.