January 3, 2025
Over the past year, many Eaton Corporation plc ( NYSE:ETN ) insiders sold a significant stake in the company which may have piqued investors' interest. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, shareholders should take a deeper look if several insiders are selling stock over a specific time period.
While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.
See our latest analysis for Eaton
Over the last year, we can see that the biggest insider sale was by the Chairman & CEO, Craig Arnold, for US$22m worth of shares, at about US$362 per share. So we know that an insider sold shares at around the present share price of US$332. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign.
Happily, we note that in the last year insiders paid US$812k for 2.71k shares. But they sold 101.72k shares for US$35m. All up, insiders sold more shares in Eaton 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 click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Eaton better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.
Over the last three months, we've seen significant insider selling at Eaton. Specifically, insiders ditched US$31m 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.
Many investors like to check how much of a company is owned by 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. Eaton insiders own about US$249m worth of shares (which is 0.2% 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.
Insiders sold Eaton shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But it is good to see that Eaton is growing earnings. It is good to see high insider ownership, but the insider selling leaves us cautious. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Eaton. Every company has risks, and we've spotted 1 warning sign for Eaton you should know about.
But note: Eaton 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.
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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.
