Anyone interested in Aehr Test Systems, Inc. (NASDAQ:AEHR) should probably be aware that the Independent Director, Fariba Danesh, recently divested US$186k worth of shares in the company, at an average price of US$18.59 each. In particular, we note that the sale equated to a 70% reduction in their position size, which doesn't exactly instill confidence.

Aehr Test Systems Insider Transactions Over The Last Year

The Chief Technology Officer, Donald Richmond, made the biggest insider sale in the last 12 months. That single transaction was for US$1.5m worth of shares at a price of US$48.75 each. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$16.55. So it is hard to draw any strong conclusion from it.

Happily, we note that in the last year insiders paid US$180k for 8.74k shares. But they sold 65.83k shares for US$2.6m. In total, Aehr Test Systems insiders sold more than they bought over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

If you are like me, then you will not want to miss this free list of small cap stocks that are not only being bought by insiders but also have attractive valuations.

Does Aehr Test Systems Boast High Insider Ownership?

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Aehr Test Systems insiders own about US$31m worth of shares. That equates to 5.6% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Do The Aehr Test Systems Insider Transactions Indicate?

Unfortunately, there has been more insider selling of Aehr Test Systems stock, than buying, in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But since Aehr Test Systems is profitable and growing, we're not too worried by this. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We'd practice some caution before buying! 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. Be aware that Aehr Test Systems is showing 4 warning signs in our investment analysis, and 1 of those is a bit unpleasant...

But note: Aehr Test Systems 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.

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