Don't Ignore The Insider Selling In Ross Stores

Simply Wall St ·  Apr 1 20:28

We wouldn't blame Ross Stores, Inc. (NASDAQ:ROST) shareholders if they were a little worried about the fact that Brian Morrow, the President & Chief Merchandising Officer of dd's DISCOUNTS recently netted about US$1.6m selling shares at an average price of US$146.    That sale reduced their total holding by 15% which is hardly insignificant, but far from the worst we've seen.    

Ross Stores Insider Transactions Over The Last Year

The Vice Chairman & CEO, Barbara Rentler, made the biggest insider sale in the last 12 months. That single transaction was for US$5.2m worth of shares at a price of US$120 each.    That means that even when the share price was below the current price of US$147, an insider wanted to cash in some shares.  When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation.  However, while insider selling is sometimes discouraging, it's only a weak signal.   This single sale was just 13% of Barbara Rentler's stake.    

Insiders in Ross Stores didn't buy any shares in the last year.    You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below.  If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

NasdaqGS:ROST Insider Trading Volume April 1st 2024

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.   Ross Stores insiders own 2.0% of the company, currently worth about US$1.0b based on the recent share price.  I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.  

What Might The Insider Transactions At Ross Stores Tell Us?

Insiders  sold stock recently, but they haven't been buying.     And there weren't any purchases to give us comfort, over the last year.    But since Ross Stores is profitable and growing, we're not too worried by this.    It is good to see high insider ownership, but the insider selling leaves us cautious.      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.    At Simply Wall St, we found 1 warning sign for Ross Stores that deserve your attention before buying any shares.  

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.

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