Generally, when a single insider buys stock, it is usually not a big deal. However, when several insiders are buying, like in the case of Rentokil Initial plc (LON:RTO), it sends a favourable message to the company's shareholders.
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.
Rentokil Initial Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when CEO & Executive Director Andrew Ransom bought UK£242k worth of shares at a price of UK£5.38 per share. That means that an insider was happy to buy shares at above the current price of UK£5.33. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
Rentokil Initial insiders may have bought shares in the last year, but they didn't sell any. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
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. Rentokil Initial insiders own about UK£11m worth of shares. That equates to 0.08% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The Rentokil Initial Insider Transactions Indicate?
The fact that there have been no Rentokil Initial insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. Overall we don't see anything to make us think Rentokil Initial insiders are doubting the company, and they do own shares. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Our analysis shows 2 warning signs for Rentokil Initial (1 makes us a bit uncomfortable!) and we strongly recommend you look at these before investing.
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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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.
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