Last week, Varonis Systems, Inc.'s (NASDAQ:VRNS) stock jumped 14%, but insiders who sold US$18m worth of stock in over the past year are likely to be in a better position. Selling at an average price of US$42.05, which is higher than the current price, may have been the wisest decision for these insiders as their investment would have been worth less now than when they sold.

While insider transactions are not the most important thing when it comes to long-term investing, we do think it is perfectly logical to keep tabs on what insiders are doing.

Varonis Systems Insider Transactions Over The Last Year

Notably, that recent sale by Guy Melamed is the biggest insider sale of Varonis Systems shares that we've seen in the last year. That means that even when the share price was below the current price of US$51.98, 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. We note that the biggest single sale was 67% of Guy Melamed's holding.

Happily, we note that in the last year insiders paid US$257k for 10.78k shares. But they sold 420.59k shares for US$18m. All up, insiders sold more shares in Varonis Systems than they bought, over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

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Varonis Systems Insiders Are Selling The Stock

The last quarter saw substantial insider selling of Varonis Systems shares. Specifically, insiders ditched US$12m 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.

Does Varonis Systems Boast High Insider Ownership?

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Varonis Systems insiders own about US$106m worth of shares (which is 1.9% 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.

So What Do The Varonis Systems Insider Transactions Indicate?

Insiders sold Varonis Systems shares recently, but they didn't buy any. And our longer term analysis of insider transactions didn't bring confidence, either. 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. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Every company has risks, and we've spotted 1 warning sign for Varonis Systems you should know about.

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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.