The fact that multiple Discover Financial Services (NYSE:DFS) 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 versus if they selling is usually more beneficial, as the latter can be open to many interpretations. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.
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 Discover Financial Services
The Executive VP & President of Consumer Banking, Carlos Minetti, made the biggest insider sale in the last 12 months. That single transaction was for US$2.7m worth of shares at a price of US$124 each. That means that an insider was selling shares at around the current price of US$118. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. In this case, the big sale took place at around the current price, so it's not too bad (but it's still not a positive).
In the last year Discover Financial Services 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Does Discover Financial Services Boast High Insider Ownership?
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. Discover Financial Services insiders own 0.6% of the company, currently worth about US$215m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Discover Financial Services Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Discover Financial Services shares in the last quarter. While we feel good about high insider ownership of Discover Financial Services, we can't say the same about the selling of shares. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Discover Financial Services. In terms of investment risks, we've identified 1 warning sign with Discover Financial Services and understanding this should be part of your investment process.
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, but not derivative transactions.
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