Some Eaton Corporation plc (NYSE:ETN) shareholders may be a little concerned to see that the Lead Independent Director, Gregory Page, recently sold a substantial US$1.3m worth of stock at a price of US$335 per share. However, it's crucial to note that they remain very much invested in the stock and that sale only reduced their holding by 7.2%.
Eaton Insider Transactions Over The Last Year
In fact, the recent sale by Gregory Page was the biggest sale of Eaton shares made by an insider individual in the last twelve months, according to our records. That means that an insider was selling shares at below the current price (US$337). We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 7.2% of Gregory Page's holding.
In the last twelve months insiders purchased 2.71k shares for US$812k. But insiders sold 20.67k shares worth US$6.2m. All up, insiders sold more shares in Eaton than they bought, over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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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. I reckon it's a good sign if insiders own a significant number of shares in the company. Eaton insiders own about US$306m worth of shares (which is 0.2% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About Eaton Insiders?
The stark truth for Eaton is that there has been more insider selling than insider buying in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. On the plus side, Eaton makes money, and is growing profits. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about 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. To assist with this, we've discovered 1 warning sign that you should run your eye over to get a better picture of Eaton.
Of course Eaton may not be the best stock to buy. So you may wish to see this free collection of high quality 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.
