When a single insider purchases stock, it is typically not a major deal. However, when multiple insiders purchase stock, like in Dave & Buster’s Entertainment, Inc.’s (NASDAQ:PLAY) instance, it’s good news for shareholders.
While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.
In the last twelve months, the biggest single purchase by an insider was when CEO & Director Tarun Lal bought US$252k worth of shares at a price of US$31.26 per share. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being US$12.57). It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. To us, it’s very important to consider the price insiders pay for shares. 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.
In the last twelve months insiders purchased 12.29k shares for US$336k. But insiders sold 5.93k shares worth US$194k. In total, Dave & Buster’s Entertainment insiders bought more than they sold over the last year. The average buy price was around US$27.36. This is nice to see since it implies that insiders might see value around current prices. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
We saw some Dave & Buster’s Entertainment insider buying shares in the last three months. insider Rodolfo Rodriguez bought US$15k worth of shares in that time. We like it when there are only buyers, and no sellers. But the amount invested in the last three months isn’t enough for us too put much weight on it, as a single factor.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. From our data, it seems that Dave & Buster’s Entertainment insiders own 2.1% of the company, worth about US$7.9m. Whilst better than nothing, we’re not overly impressed by these holdings.
Insider purchases may have been minimal, in the last three months, but there was no selling at all. Overall the buying isn’t worth writing home about. But insiders have shown more of an appetite for the stock, over the last year. While we have no worries about the insider transactions, we’d be more comfortable if they owned more Dave & Buster’s Entertainment stock. So while it’s helpful to know what insiders are doing in terms of buying or selling, it’s also helpful to know the risks that a particular company is facing. When we did our research, we found 2 warning signs for Dave & Buster’s Entertainment (1 makes us a bit uncomfortable!) that we believe deserve your full attention.
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 of direct interests only, but not derivative transactions or indirect interests.
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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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