Many Paycom Software, Inc. (NYSE:PAYC) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. Knowing whether insiders are buying is usually more helpful when evaluating insider transactions, as insider selling can have various explanations. However, if numerous insiders are selling, shareholders should investigate more.

Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.

View our latest analysis for Paycom Software

The Last 12 Months Of Insider Transactions At Paycom Software

In fact, the recent sale by Jason Clark was the biggest sale of Paycom Software shares made by an insider individual in the last twelve months, according to our records. So it's clear an insider wanted to take some cash off the table, even below the current price of US$189. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower 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 17%of Jason Clark's holding.

All up, insiders sold more shares in Paycom Software than they bought, over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

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Insiders At Paycom Software Have Sold Stock Recently

Over the last three months, we've seen notably more insider selling, than insider buying, at Paycom Software. In that time, Chief Administrative Officer Jason Clark dumped US$1.7m worth of shares. On the other hand we note Independent Director J.C. Watts bought US$50k worth of shares , as previously mentioned . We don't view these transactions as a positive sign.

Insider Ownership Of Paycom Software

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Paycom Software insiders own 16% of the company, currently worth about US$1.7b based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Does This Data Suggest About Paycom Software Insiders?

The insider sales have outweighed the insider buying, at Paycom Software, in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But since Paycom Software is profitable and growing, we're not too worried by this. It is good to see high insider ownership, but the insider selling leaves us cautious. 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. Every company has risks, and we've spotted 2 warning signs for Paycom Software you should know about.

But note: Paycom Software 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.