The fact that multiple Quanta Services, Inc. (NYSE:PWR) 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.
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 Quanta Services
The President, Earl Austin, made the biggest insider sale in the last 12 months. That single transaction was for US$34m worth of shares at a price of US$263 each. So it’s clear an insider wanted to take some cash off the table, even slightly below the current price of US$264. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower 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 17% of Earl Austin’s holding.
In the last year Quanta Services insiders didn’t buy any company stock. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
For those who like to find hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.
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. Quanta Services insiders own about US$419m worth of shares (which is 1.1% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
There haven’t been any insider transactions in the last three months — that doesn’t mean much. While we feel good about high insider ownership of Quanta Services, we can’t say the same about the selling of shares. 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. In terms of investment risks, we’ve identified 1 warning sign with Quanta Services and understanding it should be part of your investment process.
