The fact that multiple Eaton Corporation plc (NYSE:ETN) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. Knowing whether insiders are buying is usually more helpful when evaluating insider transactions, as insider selling can have various explanations. However, if numerous insiders are selling, shareholders should investigate more.
Although we don’t think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.
View our latest analysis for Eaton
The Last 12 Months Of Insider Transactions At Eaton
In the last twelve months, the biggest single sale by an insider was when the Executive VP & CFO, Olivier Leonetti, sold US$1.2m worth of shares at a price of US$272 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$302. 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. It is worth noting that this sale was 88% of Olivier Leonetti’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. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Eaton better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.
Eaton Insiders Are Selling The Stock
Over the last three months, we’ve seen significant insider selling at Eaton. In total, Executive VP & Chief Legal Officer Taras Szmagala sold US$97k 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 Eaton 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. Eaton insiders own 0.2% of the company, currently worth about US$291m based on the recent share price. 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 Does This Data Suggest About Eaton Insiders?
An insider hasn’t bought Eaton stock in the last three months, but there was some selling. Looking to the last twelve months, our data doesn’t show any insider buying. 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. Therefore, you should definitely take a look at this FREE report showing analyst forecasts for Eaton.
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.