In the last year, multiple insiders have substantially increased their holdings of Emerson Electric Co. (NYSE:EMR) stock, indicating that insiders' optimism about the company's prospects has increased.

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.

Emerson Electric Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the Executive VP & COO, Ram Krishnan, sold US$1.2m worth of shares at a price of US$96.09 per share. That means that even when the share price was below the current price of US$113, 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 7.9% of Ram Krishnan's stake.

Happily, we note that in the last year insiders paid US$2.1m for 24.40k shares. But they sold 19.05k shares for US$1.9m. In the last twelve months there was more buying than selling by Emerson Electric insiders. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

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. Emerson Electric insiders own 0.3% of the company, currently worth about US$200m 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.

So What Do The Emerson Electric Insider Transactions Indicate?

There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like Emerson Electric insiders think the business has merit. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Every company has risks, and we've spotted 1 warning sign for Emerson Electric you should know about.

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.