Insider Sellers Might Regret Selling Dream Finders Homes Shares at a Lower Price Than Current Market Value

Even though Dream Finders Homes, Inc. (NYSE:DFH) has fallen by 10% over the past week , insiders who sold US$15m worth of stock over the past year have had less luck. Insiders would probably have been better off holding on to their shares given that the average selling price of US$17.10 is still lower than the current share price.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

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The Last 12 Months Of Insider Transactions At Dream Finders Homes

Over the last year, we can see that the biggest insider sale was by the insider, William Lovett, for US$2.0m worth of shares, at about US$15.17 per share. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. The silver lining is that this sell-down took place above the latest price (US$11.40). So it is hard to draw any strong conclusion from it.

Happily, we note that in the last year insiders paid US$1.4m for 103.00k shares. But insiders sold 864.24k shares worth US$15m. All up, insiders sold more shares in Dream Finders Homes than they bought, over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

See our latest analysis for Dream Finders Homes

I will like Dream Finders Homes 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.

Insiders At Dream Finders Homes Have Bought Stock Recently

Over the last three months, we've seen significantly more insider buying, than insider selling, at Dream Finders Homes. Insiders spent US$1.4m on shares. But we did see insider William Lovett sell shares worth US$943k. The buying outweighs the selling, which suggests that insiders may believe the company will do well in the future.

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. Dream Finders Homes insiders own 70% of the company, currently worth about US$721m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Does This Data Suggest About Dream Finders Homes Insiders?

It's certainly positive to see the recent insider purchases. On the other hand the transaction history, over the last year, isn't so positive. The high levels of insider ownership, and the recent buying by some insiders suggests they are well aligned and optimistic. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. For example, Dream Finders Homes has 3 warning signs (and 2 which are significant) we think you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.