As Smartsheet Inc. (NYSE:SMAR) drops to US$4.5b market cap, insiders might rethink their US$11m stock purchase earlier this year

Insiders who acquired US$11m worth of Smartsheet Inc.'s (NYSE:SMAR) stock at an average price of US$63.05 in the past 12 months may be dismayed by the recent 6.2% price decline. Insiders invest with the hopes of seeing their money grow in value over time. However, as a result of recent losses, their initial investment is now only worth US$6.2m, which is not what they expected.

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.

Check out our latest analysis for Smartsheet

The Last 12 Months Of Insider Transactions At Smartsheet

In the last twelve months, the biggest single purchase by an insider was when Independent Director James White bought US$9.5m worth of shares at a price of US$63.07 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$35.03). It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing 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.

Happily, we note that in the last year insiders paid US$11m for 176.43k shares. But insiders sold 47.08k shares worth US$3.1m. In total, Smartsheet insiders bought more than they sold over the last year. 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!

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).

Insiders At Smartsheet Have Sold Stock Recently

Over the last three months, we've seen significant insider selling at Smartsheet. Specifically, Chief Legal Officer & Secretary Jolene Marshall ditched US$325k worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Insider Ownership Of Smartsheet

For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. It's great to see that Smartsheet insiders own 3.4% of the company, worth about US$156m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Do The Smartsheet Insider Transactions Indicate?

An insider sold Smartsheet shares recently, but they didn't buy any. On the other hand, the insider transactions over the last year are encouraging. And insider ownership remains quite considerable. So we're not too bothered by recent selling. 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 4 warning signs for Smartsheet (1 can't be ignored!) that we believe deserve your full attention.

But note: Smartsheet may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.

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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