While The Scotts Miracle-Gro Company (NYSE:SMG) shareholders have enjoyed a good week with stock up 13%, they need remain vigilant. In spite of the relatively cheap prices, insiders made the decision to sell US$5.1m worth of stock in the last 12 months. This could be a warning indicator of vulnerabilities in the future.
While insider transactions are not the most important thing when it comes to long-term investing, we do think it is perfectly logical to keep tabs on what insiders are doing.
The Last 12 Months Of Insider Transactions At Scotts Miracle-Gro
In the last twelve months, the biggest single sale by an insider was when the President, James Hagedorn, sold US$4.3m worth of shares at a price of US$54.63 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$81.21. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was 67% of James Hagedorn's holding.
Scotts Miracle-Gro insiders didn't buy any shares over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like Scotts Miracle-Gro 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 Scotts Miracle-Gro Have Sold Stock Recently
The last three months saw significant insider selling at Scotts Miracle-Gro. Specifically, Independent Director Stephen Johnson ditched US$75k 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 insiders think that the shares are a bargain.
Insider Ownership
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with 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. Scotts Miracle-Gro insiders own about US$42m worth of shares. That equates to 1.0% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Scotts Miracle-Gro Tell Us?
An insider sold stock recently, but they haven't been buying. Looking to the last twelve months, our data doesn't show any insider buying. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. So we'd only buy after careful consideration. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Case in point: We've spotted 2 warning signs for Scotts Miracle-Gro you should be aware of, and 1 of them shouldn't be ignored.
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.