Paycom Software Insiders Sell US$3.5m Of Stock, Possibly Signalling Caution

In the last year, many Paycom Software, Inc. (NYSE:PAYC) 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, if numerous insiders are selling, shareholders should investigate more.

While insider transactions are not the most important thing when it comes to long-term investing, we do think it is perfectly logical to keep tabs on what insiders are doing.

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Paycom Software Insider Transactions Over The Last Year

The insider, Craig Boelte, made the biggest insider sale in the last 12 months. That single transaction was for US$1.9m worth of shares at a price of US$156 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$245. 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. 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. We note that the biggest single sale was only 4.0% of Craig Boelte's holding.

Insiders in Paycom Software didn't buy any shares in the last year. 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!

Check out our latest analysis for Paycom Software

I will like Paycom Software 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.

Paycom Software Insiders Are Selling The Stock

Over the last three months, we've seen significant insider selling at Paycom Software. In total, Chief Operating Officer Randy Peck dumped US$234k 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.

Insider Ownership Of Paycom Software

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. Paycom Software insiders own about US$1.6b worth of shares (which is 11% of the company). 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 Paycom Software Insiders?

An insider hasn't bought Paycom Software 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. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example - Paycom Software has 1 warning sign we think you should be aware of.

But note: Paycom Software may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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.