Insiders Could Have Profited By Holding onto Vital Farms Shares Despite 11% Drop

Even though Vital Farms, Inc. (NASDAQ:VITL) has fallen by 11% over the past week , insiders who sold US$18m worth of stock over the past year have had less luck. Given that the average selling price of US$50.78 is still lower than the current share price, insiders would probably have been better off keeping their shares.

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.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Vital Farms Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the insider, Matthew O'Hayer, sold US$10m worth of shares at a price of US$51.98 per share. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$12.15. So it may not tell us anything about how insiders feel about the current share price.

Happily, we note that in the last year insiders paid US$613k for 60.60k shares. But insiders sold 353.70k shares worth US$18m. In total, Vital Farms insiders sold more than they bought over the last year. They sold for an average price of about US$50.78. It is certainly not great to see that insiders have sold shares in the company. However, we do note that the average sale price was significantly higher than the current share price (which is US$12.15). The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

View our latest analysis for Vital Farms

For those who like to find hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.

Insiders At Vital Farms Have Bought Stock Recently

Over the last quarter, Vital Farms insiders have spent a meaningful amount on shares. Not only was there no selling that we can see, but they collectively bought US$422k worth of shares. This is a positive in our book as it implies some confidence.

Insider Ownership

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. Vital Farms insiders own about US$102m worth of shares (which is 20% 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 Vital Farms Insiders?

It is good to see recent purchasing. But we can't say the same for the transactions over the last 12 months. The recent buying by some insiders , along with high insider ownership, suggest that Vital Farms insiders are fairly aligned, and optimistic. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Vital Farms. In terms of investment risks, we've identified 2 warning signs with Vital Farms and understanding these should be part of your investment process.

But note: Vital Farms 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.