Insiders at Echo Global Logistics, Inc. (NASDAQ:ECHO) sold US$2.2m worth of stock, possibly indicating weakness in the future

Over the past year, many Echo Global Logistics, Inc. (NASDAQ:ECHO) 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, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

Although we don’t think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Echo Global Logistics Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the President & COO, David Menzel, for US£587k worth of shares, at about US£29.45 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US£31.32. 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. 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. It is worth noting that this sale was only 15% of David Menzel’s holding.

Echo Global Logistics insiders didn’t buy any shares 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!

insider-trading-volumeNasdaqGS:ECHO Insider Trading Volume September 10th 2021

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).

Insiders at Echo Global Logistics Have Sold Stock Recently

The last quarter saw substantial insider selling of Echo Global Logistics shares.

Specifically, Chairman & CEO Douglas Waggoner ditched US£490k worth of shares in that time, and we didn’t record any purchases whatsoever. Overall this makes us a bit cautious, but it’s not the be all and end all.

Insider Ownership

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term.

Insiders own 2.3% of Echo Global Logistics shares, worth about US£19m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

What Might The Insider Transactions At Echo Global Logistics Tell Us?

An insider hasn’t bought Echo Global Logistics stock in the last three months, but there was some selling.

And even if we look at the last year, we didn’t see any purchases. But since Echo Global Logistics is profitable and growing, we’re not too worried by this. Insiders own shares, but we’re still pretty cautious, given the history of sales.

So we’d only buy after careful consideration. 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 Echo Global Logistics (1 is a bit unpleasant!) that we believe deserve your full attention.

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.

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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