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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 analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, if numerous insiders are selling, shareholders should investigate more.
Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.
Check out our latest analysis for Discover Financial Services
The Last 12 Months Of Insider Transactions At Discover Financial Services
The Executive VP and Chief HR & Administrative Officer, R. Eichfeld, made the biggest insider sale in the last 12 months. That single transaction was for US$1.5m worth of shares at a price of US$114 each. That means that an insider was selling shares at slightly below the current price (US$119). 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 30% of R. Eichfeld's holding.
Insiders in Discover Financial Services 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. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Discover Financial Services insiders own about US$134m worth of shares (which is 0.4% of the company). 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 Discover Financial Services Insider Transactions Indicate?
The fact that there have been no Discover Financial Services insider transactions recently certainly doesn't bother us. 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. Case in point: We've spotted 2 warning signs for Discover Financial Services you should be aware of, and 1 of them is potentially serious.