Insiders At Paychex Sold US$8.9m In Stock, Alluding To Potential Weakness
The fact that multiple Paychex, Inc. (NASDAQ:PAYX) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.
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.
View our latest analysis for Paychex
The Last 12 Months Of Insider Transactions At Paychex
In the last twelve months, the biggest single sale by an insider was when the Chairman, Martin Mucci, sold US$5.5m worth of shares at a price of US$117 per share. That means that even when the share price was slightly below the current price of US$118, 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. 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. It is worth noting that this sale was only 9.3% of Martin Mucci's holding.
Over the last year we saw more insider selling of Paychex shares, than buying. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).
Paychex Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Paychex shares. In total, Chairman Martin Mucci sold US$5.5m 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
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Paychex insiders own about US$4.6b worth of shares (which is 11% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Does This Data Suggest About Paychex Insiders?
An insider hasn't bought Paychex stock in the last three months, but there was some selling. Zooming out, the longer term picture doesn't give us much comfort. But it is good to see that Paychex is growing earnings. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. 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. Every company has risks, and we've spotted 1 warning sign for Paychex you should know about.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.
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