Although Stitch Fix, Inc. (NASDAQ:SFIX) shareholders have enjoyed a great week with the stock up 14%, insiders who sold stock over the past year haven't fared as well. The return on their investment would have been much higher had they held on to their stock.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.
The Last 12 Months Of Insider Transactions At Stitch Fix
Over the last year, we can see that the biggest insider sale was by the insider, Sarah Barkema, for US$112k worth of shares, at about US$3.74 per share. That means that even when the share price was below the current price of US$4.87, an insider wanted to cash in some shares. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was 68% of Sarah Barkema's holding. Sarah Barkema was the only individual insider to sell shares in the last twelve months.
Sarah Barkema divested 46.31k shares over the last 12 months at an average price of US$3.21. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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Does Stitch Fix 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. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Stitch Fix insiders own 13% of the company, worth about US$76m. 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 Does This Data Suggest About Stitch Fix Insiders?
The fact that there have been no Stitch Fix insider transactions recently certainly doesn't bother us. Our analysis of Stitch Fix insider transactions leaves us cautious. The modest level of insider ownership is, at least, some comfort. 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. To assist with this, we've discovered 3 warning signs that you should run your eye over to get a better picture of Stitch Fix.
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.
