The fact that multiple Rapid7, Inc. (NASDAQ:RPD) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

The Last 12 Months Of Insider Transactions At Rapid7

In the last twelve months, the biggest single sale by an insider was when the insider, Andrew Burton, sold US$2.0m worth of shares at a price of US$52.89 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. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$40.28. So it may not tell us anything about how insiders feel about the current share price.

Happily, we note that in the last year insiders paid US$161k for 4.50k shares. But insiders sold 160.42k shares worth US$7.9m. In total, Rapid7 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 like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Rapid7 Insiders Bought Stock Recently

We saw some Rapid7 insider buying shares in the last three months. In total, insiders bought US$161k worth of shares in that time. But Independent Director Reeny Sondhi sold US$147k worth. While it's good to see the insider buying, the net amount bought isn't enough for us to gain much confidence from it.

Does Rapid7 Boast High 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. We usually like to see fairly high levels of insider ownership. Insiders own 1.7% of Rapid7 shares, worth about US$42m. 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 Rapid7 Insider Transactions Indicate?

Our data shows a little insider buying, but no selling, in the last three months. That said, the purchases were not large. Recent insider selling makes us a little nervous, in light of the broader picture of Rapid7 insider transactions. But it's good to see that insiders own shares in the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. When we did our research, we found 2 warning signs for Rapid7 (1 doesn't sit too well with us!) that we believe deserve your full attention.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.