In the last year, many Eaton Corporation plc (NYSE:ETN) insiders sold a substantial stake in the company which may have sparked shareholders’ attention. Knowing whether insiders are buying is usually more helpful when evaluating insider transactions, as insider selling can have various explanations. However, shareholders should take a deeper look if several insiders are selling stock over a specific time period.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.
Over the last year, we can see that the biggest insider sale was by the insider, Craig Arnold, for US$16m worth of shares, at about US$306 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$332. 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. 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 9.4% of Craig Arnold’s stake.
All up, insiders sold more shares in Eaton than they bought, over the last year. 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!
See our latest analysis for Eaton
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It’s good to see that Eaton insiders have made notable investments in the company’s shares. We can see that Director Gerald Johnson paid US$106k for shares in the company. No-one sold. This is a positive in our book as it implies some confidence.
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Eaton insiders own 0.2% of the company, currently worth about US$246m 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.
It’s certainly positive to see the recent insider purchase. On the other hand the transaction history, over the last year, isn’t so positive. The high levels of insider ownership, and the recent buying by an insider suggests they are well aligned and optimistic. While it’s good to be aware of 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. Case in point: We’ve spotted 1 warning sign for Eaton 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.