Don't Ignore The Insider Selling In Jacobs Solutions

We wouldn't blame Jacobs Solutions Inc. (NYSE:J) shareholders if they were a little worried about the fact that Patrick Hill, the Executive VP & President of Global Operations recently netted about US$2.5m selling shares at an average price of US$144. That sale reduced their total holding by 20% which is hardly insignificant, but far from the worst we've seen.

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Jacobs Solutions Insider Transactions Over The Last Year

In fact, the recent sale by Patrick Hill was the biggest sale of Jacobs Solutions shares made by an insider individual in the last twelve months, according to our records. That means that an insider was selling shares at below the current price (US$145). We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. 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. This single sale was just 20% of Patrick Hill's stake.

Happily, we note that in the last year insiders paid US$814k for 6.77k shares. But they sold 18.64k shares for US$2.7m. Over the last year we saw more insider selling of Jacobs Solutions 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!

View our latest analysis for Jacobs Solutions

I will like Jacobs Solutions 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.

Insider Ownership Of Jacobs Solutions

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Jacobs Solutions insiders own about US$192m worth of shares (which is 1.1% 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.

What Might The Insider Transactions At Jacobs Solutions Tell Us?

The stark truth for Jacobs Solutions is that there has been more insider selling than insider buying in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. It is good to see high insider ownership, but the insider selling leaves us cautious. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that Jacobs Solutions has 3 warning signs and it would be unwise to ignore these.

But note: Jacobs Solutions 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.