Preferred Bank (NASDAQ:PFBC) shareholders might have a reason to worry after multiple insiders sold their shares over the last year. When evaluating insider transactions, knowing whether insiders are buying versus if they selling is usually more beneficial, 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.

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.

Preferred Bank Insider Transactions Over The Last Year

The Chairman, Li Yu, made the biggest insider sale in the last 12 months. That single transaction was for US$280k worth of shares at a price of US$55.98 each. That means that even when the share price was below the current price of US$70.68, an insider wanted to cash in some shares. 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. It is worth noting that this sale was only 0.7% of Li Yu's holding.

Over the last year, we can see that insiders have bought 1.05k shares worth US$63k. On the other hand they divested 5.30k shares, for US$300k. In total, Preferred Bank insiders sold more 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. By clicking on the graph below, you can see the precise details of each insider transaction!

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Insiders At Preferred Bank Have Sold Stock Recently

The last three months saw some Preferred Bank insider selling. Executive VP & CFO Edward Czajka only netted US$20k selling shares, in that period. It's not great to see insider selling, nor the lack of recent buyers. But the selling simply isn't sufficiently substantial to be of much use as a signal.

Insider Ownership Of Preferred Bank

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. Preferred Bank insiders own about US$80m worth of shares. That equates to 8.2% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

What Might The Insider Transactions At Preferred Bank Tell Us?

We did not see any insider buying in the last three months, but we did see selling. However, the sales are not big enough to concern us at all. Recent sales exacerbate our caution arising from analysis of Preferred Bank insider transactions. But we do like the fact that insiders own a fair chunk of 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. At Simply Wall St, we've found that Preferred Bank has 2 warning signs (1 makes us a bit uncomfortable!) that deserve your attention before going any further with your analysis.

But note: Preferred Bank 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.