Insiders At PriceSmart Sold US$11m In Stock, Alluding To Potential Weakness

The fact that multiple PriceSmart, Inc. (NASDAQ:PSMT) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. 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, logic dictates you should pay some attention to whether insiders are buying or selling shares.

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The Last 12 Months Of Insider Transactions At PriceSmart

The Director, Sherry Bahrambeygui, made the biggest insider sale in the last 12 months. That single transaction was for US$2.0m worth of shares at a price of US$89.81 each. That means that even when the share price was below the current price of US$100, an insider wanted to cash in some shares. 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. This single sale was just 22% of Sherry Bahrambeygui's stake.

Insiders in PriceSmart didn't buy any shares in the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

View our latest analysis for PriceSmart

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PriceSmart Insiders Are Selling The Stock

The last quarter saw substantial insider selling of PriceSmart shares. In total, insiders sold US$766k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Does PriceSmart Boast High Insider Ownership?

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. PriceSmart insiders own 7.7% of the company, currently worth about US$221m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Does This Data Suggest About PriceSmart Insiders?

Insiders sold stock recently, but they haven't been buying. And there weren't any purchases to give us comfort, over the last year. But it is good to see that PriceSmart is growing earnings. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing PriceSmart. Case in point: We've spotted 1 warning sign for PriceSmart 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.