Don't Ignore The Insider Selling In RH

Some RH (NYSE:RH) shareholders may be a little concerned to see that the Chairman & CEO, Gary Friedman, recently sold a substantial US$21m worth of stock at a price of US$165 per share. However, that sale only accounted for 3.7% of their holding, so arguably it doesn't say much about their conviction.

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RH Insider Transactions Over The Last Year

Notably, that recent sale by Gary Friedman is the biggest insider sale of RH shares that we've seen in the last year. So we know that an insider sold shares at around the present share price of US$168. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. In this case, the big sale took place at around the current price, so it's not too bad (but it's still not a positive).

Over the last year we saw more insider selling of RH shares, than buying. 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!

Check out our latest analysis for RH

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).

Insider Ownership

Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that RH insiders own 19% of the company, worth about US$572m. 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 Do The RH Insider Transactions Indicate?

The insider sales have outweighed the insider buying, at RH, in the last three months. Zooming out, the longer term picture doesn't give us much comfort. On the plus side, RH makes money, and is growing profits. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing RH. Every company has risks, and we've spotted 3 warning signs for RH (of which 1 shouldn't be ignored!) you should know about.

Of course RH may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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.