The stock of ServiceNow, Inc. (NYSE:NOW) is up 8.2% in the past week, but insiders who have sold US$19m worth of stock over the past year are likely in a more advantageous position. Selling at an average price of US$517, which is higher than the current price may be the right call because holding the stock means that their investment will be worth less now than at the time of the sale.
While we don’t think shareholders should just follow insider transactions, we would consider it foolish to ignore insider transactions.
Check out our latest review for ServiceNow
ServiceNow Insider Transactions In The Past Year
In the past year, we can see that the biggest insider sale was Chief Operating Officer, Chirantan Desai, for US$3.3m worth of shares, at about US$479 per share. While insider selling is negative, to us, it is more negative if the shares are sold at a lower price. The good news is that this big sale is above the current price of US$421. So it may not shed much light on insider confidence at current levels.
Over the past year, we have seen more insiders selling ServiceNow shares, than buying. You can see insider transactions (of companies and individuals) over the past year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I would like ServiceNow more if I could see some big insider buys. While we wait, check this out Free list of growing companies with multiple, recent, insider buying.
ServiceNow Insiders Have Sold Stock Recently
The last three months have seen significant insider selling in ServiceNow. In total, insiders sold US$4.8m worth of shares during that period, and we did not record any purchases. This makes it hard to argue that all insiders think the shares are a bargain.
Insider Ownership of the Service Now
Looking at the total insider shareholding in a company can help inform your view of whether they are well aligned with common shareholders. We typically like to see a relatively high level of insider ownership. ServiceNow insiders own about US$205m worth of shares (which is 0.2% of the company). Most shareholders will be happy to see this type of insider ownership, as it suggests that management incentives are well aligned with those of other shareholders.
So What Does This Data Suggest About ServiceNow Insiders?
Insiders have sold the stock recently, but are not buying yet. And our long-term analysis of insider transactions did not bring confidence either. But since ServiceNow is profitable and growing, we’re not too worried about it. High insider ownership is good to see, but insider selling makes us wary. 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 a particular company faces. In terms of investment risks, we have identified 1 warning sign with ServiceNow and understanding that it should be part of your investment process.
Of course ServiceNow may not be the best stock to buy. So you might want to see it Free collection of quality companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently consider open market transactions and private dispositions, but not derivative transactions.
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This Simply Wall St article is general. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals, or your financial situation. We aim to bring you long-term focused analysis driven by primary data. Note that our review may not factor in the company’s latest price-sensitive or material quality announcements. Simply Wall St has no position in any of the stocks mentioned.
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