February 29, 2024
Finance

McDonald’s Insiders Sell US$6.5m Of Stock, Possibly Signalling Caution


In the last year, many McDonald’s Corporation (NYSE:MCD) insiders sold a substantial stake in the company which may have sparked shareholders’ attention. 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, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Check out our latest analysis for McDonald’s

McDonald’s Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the President, Christopher Kempczinski, sold US$1.6m worth of shares at a price of US$280 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$297. 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. We note that the biggest single sale was only 16% of Christopher Kempczinski’s holding.

All up, insiders sold more shares in McDonald’s than they bought, over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

insider-trading-volume

insider-trading-volume

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

McDonald’s Insiders Are Selling The Stock

Over the last three months, we’ve seen significant insider selling at McDonald’s. Specifically, insiders ditched US$1.4m 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 Of McDonald’s

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. McDonald’s insiders own about US$241m worth of shares (which is 0.1% 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 Does This Data Suggest About McDonald’s Insiders?

Insiders sold McDonald’s shares recently, but they didn’t buy any. Zooming out, the longer term picture doesn’t give us much comfort. But it is good to see that McDonald’s is growing earnings. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn’t make us feel confident about the company. So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. For example – McDonald’s has 2 warning signs we think you should be aware of.

But note: McDonald’s 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 of direct interests only, but not derivative transactions or indirect interests.

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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