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It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell MAXIMUS, Inc. (NYSE:MMS), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, such insiders must disclose their trading activities, and not trade on inside information.
We don’t think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
Check out our latest analysis for MAXIMUS
The Last 12 Months Of Insider Transactions At MAXIMUS
In the last twelve months, the biggest single sale by an insider was when Vice Chairman & Senior Advisor to the CEO Richard Montoni sold US$2.2m worth of shares at a price of US$72.03 per share. So what is clear is that an insider saw fit to sell at around the current price of US$64.79. While their view may have changed since the sale, this is not a particularly positive fact. Arguably, insider selling at around current prices should give us reason to reflect on whether the stock is fully valued at the moment.
Over the last year, we note insiders sold 78.00k shares worth US$5.4m. All up, insiders sold more shares in MAXIMUS than they bought, over the last year. The average sell price was around US$69.36. We don’t gain much confidence from insider selling near the recent share price. Since insiders sell for many reasons, we wouldn’t put too much weight on it. You can see a visual depiction of insider transactions over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
MAXIMUS Insiders Are Selling The Stock
The last three months saw significant insider selling at MAXIMUS. In total, insiders dumped US$4.7m worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the directors think that the shares are a bargain.
Insider Ownership
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. MAXIMUS insiders own about US$55m worth of shares (which is 1.3% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.