Many Steel Dynamics, Inc. (NASDAQ:STLD) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. 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, 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.

Steel Dynamics Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the Senior Vice President of Flat Roll Steel Group, Christopher Graham, for US$5.0m worth of shares, at about US$105 per share. That means that even when the share price was below the current price of US$121, 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. 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. This single sale was just 44% of Christopher Graham's stake.

Insiders in Steel Dynamics didn't buy any shares in the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart 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 Steel Dynamics 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.

Insiders At Steel Dynamics Have Sold Stock Recently

Over the last three months, we've seen significant insider selling at Steel Dynamics. In total, insiders sold US$3.1m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Insider Ownership Of Steel Dynamics

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Steel Dynamics insiders own 6.5% of the company, currently worth about US$1.2b based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

What Might The Insider Transactions At Steel Dynamics Tell Us?

Insiders sold Steel Dynamics shares recently, but they didn't buy any. And there weren't any purchases to give us comfort, over the last year. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 2 warning signs for Steel Dynamics you should be aware of, and 1 of them is concerning.

But note: Steel Dynamics 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.

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