CoStar is profitable and growing, yet insiders are not buying, they are selling. What does this signal?
in Simply Wall St. on September 16, 2020
We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell CoStar Group, Inc. (NASDAQ:CSGP), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
We don’t think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
CoStar Group Insider Transactions Over The Last Year
The Independent Chairman of the Board, Michael Klein, made the biggest insider sale in the last 12 months. That single transaction was for US$9.6m worth of shares at a price of US$648 each. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$843. 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 only 6.1% of Michael Klein’s holding.
Insiders in CoStar Group 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!
I will like CoStar Group better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at CoStar Group Have Sold Stock Recently
Over the last three months, we’ve seen significant insider selling at CoStar Group. In total, insiders dumped US$7.9m worth of shares in that time, and we didn’t record any purchases whatsoever. Overall this makes us a bit cautious, but it’s not the be all and end all.
Insider Ownership of CoStar Group
Many investors like to check how much of a company is owned by insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. CoStar Group insiders own 1.1% of the company, currently worth about US$369m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The CoStar Group Insider Transactions Indicate?
Insiders haven’t bought CoStar Group stock in the last three months, but there was some selling. Looking to the last twelve months, our data doesn’t show any insider buying. But since CoStar Group is profitable and growing, we’re not too worried by this. The company boasts high insider ownership, but we’re a little hesitant, given the history of share sales. So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. At Simply Wall St, we found 2 warning signs for CoStar Group that deserve your attention before buying any shares.
This article by Simply Wall St is general in nature. 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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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, but not derivative transactions.