We wouldn't blame Eaton Corporation plc (NYSE:ETN) shareholders if they were a little worried about the fact that Nanda Cheruvatath, a company insider, recently netted about US$1.3m selling shares at an average price of US$168. That sale reduced their total holding by 35% which is hardly insignificant, but far from the worst we've seen.
The Last 12 Months Of Insider Transactions At Eaton
The insider, Richard Fearon, made the biggest insider sale in the last 12 months. That single transaction was for US$3.5m worth of shares at a price of US$118 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$169. 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. 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. It is worth noting that this sale was only 20% of Richard Fearon's holding.
Over the last year we saw more insider selling of Eaton shares, than buying. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insider Ownership of Eaton
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. A high insider ownership often makes company leadership more mindful of shareholder interests. Eaton insiders own about US$158m worth of shares (which is 0.2% of the company). 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 Eaton Tell Us?
Unfortunately, there has been more insider selling of Eaton stock, than buying, in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But it is good to see that Eaton 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. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. In terms of investment risks, we've identified 2 warning signs with Eaton and understanding them should be part of your investment process.
Of course Eaton 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, but not derivative transactions.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
