The fact that multiple Sprouts Farmers Market, Inc. (NASDAQ:SFM) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, if numerous insiders are selling, shareholders should investigate more.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

The Last 12 Months Of Insider Transactions At Sprouts Farmers Market

The CEO & Director, Jack Sinclair, made the biggest insider sale in the last 12 months. That single transaction was for US$4.2m worth of shares at a price of US$63.56 each. That means that even when the share price was below the current price of US$144, an insider wanted to cash in some shares. 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. 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 25% of Jack Sinclair's holding.

In the last year Sprouts Farmers Market insiders didn't buy any company stock. 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!

For those who like to find hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.

Sprouts Farmers Market Insiders Are Selling The Stock

The last quarter saw substantial insider selling of Sprouts Farmers Market shares. In total, insiders dumped US$1.7m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Does Sprouts Farmers Market Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Sprouts Farmers Market insiders own about US$56m worth of shares. That equates to 0.4% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

So What Does This Data Suggest About Sprouts Farmers Market Insiders?

Insiders sold stock recently, but they haven't been buying. And there weren't any purchases to give us comfort, over the last year. On the plus side, Sprouts Farmers Market makes money, and is growing profits. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. So we'd only buy after careful consideration. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Sprouts Farmers Market. To assist with this, we've discovered 1 warning sign that you should run your eye over to get a better picture of Sprouts Farmers Market.

Of course Sprouts Farmers Market 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.