Many Builders FirstSource, Inc. (NYSE:BLDR) 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, 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.

Check out our latest analysis for Builders FirstSource

Builders FirstSource Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the President of Commercial Operations, Michael Farmer, for US$1.4m worth of shares, at about US$109 per share. That means that even when the share price was below the current price of US$127, an insider wanted to cash in some shares. 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 24% of Michael Farmer's holding.

Insiders in Builders FirstSource didn't buy any shares in 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!

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 Builders FirstSource Have Sold Stock Recently

The last three months saw significant insider selling at Builders FirstSource. Specifically, insiders ditched US$1.9m 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.

Does Builders FirstSource Boast High Insider Ownership?

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Builders FirstSource insiders own about US$361m worth of shares (which is 2.1% of the company). 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 Builders FirstSource Tell Us?

Insiders sold stock recently, but they haven't been buying. And there weren't any purchases to give us comfort, over the last year. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. For example, Builders FirstSource has 3 warning signs (and 1 which is concerning) we think you should know about.

But note: Builders FirstSource 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.