The Charles Schwab Corporation (NYSE:SCHW) insiders sold US$175m worth of stock suggesting impending weakness.

Over the past year, many The Charles Schwab Corporation (NYSE:SCHW) insiders sold a significant stake in the company which may have piqued investors' interest. 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, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

Check out our latest analysis for Charles Schwab

Charles Schwab Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the Founder & Co-Chairman, Charles Schwab, for US$19m worth of shares, at about US$69.43 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$73.71. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 0.2% of Charles Schwab's holding.

All up, insiders sold more shares in Charles Schwab than they bought, over the last year. 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!

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Insiders At Charles Schwab Have Sold Stock Recently

The last three months saw significant insider selling at Charles Schwab. Specifically, Founder & Co-Chairman Charles Schwab ditched US$34m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

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. Charles Schwab insiders own about US$8.7b worth of shares (which is 6.2% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The Charles Schwab Insider Transactions Indicate?

An insider sold stock recently, but they haven't been buying. Despite some insider buying, the longer term picture doesn't make us feel much more positive. On the plus side, Charles Schwab makes money, and is growing profits. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. 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. For example - Charles Schwab has 1 warning sign we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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