While it's been a great week for IDT Corporation (NYSE:IDT) shareholders after stock gained 23%, they should consider it with a grain of salt. The fact that insiders chose to dispose of US$1.1m worth of stock in the past 12 months even though prices were relatively low could be indicative of some anticipated weakness.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

IDT Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the President, Abilio Pereira, sold US$594k worth of shares at a price of US$37.95 per share. That means that even when the share price was below the current price of US$46.58, 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. We note that the biggest single sale was only 23% of Abilio Pereira's holding.

Insiders in IDT didn't buy any shares in the last year. 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!

If you are like me, then you will not want to miss this free list of small cap stocks that are not only being bought by insiders but also have attractive valuations.

IDT Insiders Are Selling The Stock

The last three months saw significant insider selling at IDT. Specifically, insiders ditched US$312k 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 IDT 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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. IDT insiders own 19% of the company, currently worth about US$184m 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 IDT Tell Us?

Insiders sold IDT shares recently, but they didn't buy any. And even if we look at the last year, we didn't see any purchases. But it is good to see that IDT is growing earnings. 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. For example - IDT has 1 warning sign we think you should be aware of.

Of course IDT 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.