While DoorDash, Inc. (NASDAQ:DASH) shareholders have had a good week with the stock up 14%, they shouldn't let their guards down. In spite of the relatively cheap prices, insiders made the decision to sell US$25m worth of stock in the last 12 months. This could be a warning indicator of vulnerabilities in the future.

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.

The Last 12 Months Of Insider Transactions At DoorDash

In the last twelve months, the biggest single sale by an insider was when the President & COO, Prabir Adarkar, sold US$2.3m worth of shares at a price of US$116 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. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 2.8% of Prabir Adarkar's holding.

DoorDash insiders didn't buy any shares over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

I will like DoorDash 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 DoorDash Have Sold Stock Recently

The last three months saw significant insider selling at DoorDash. In total, insiders dumped US$7.0m 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 DoorDash

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. DoorDash insiders own about US$3.3b worth of shares (which is 6.9% of the company). 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 Do The DoorDash Insider Transactions Indicate?

Insiders sold stock recently, but they haven't been buying. Looking to the last twelve months, our data doesn't show any insider buying. 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 DoorDash you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com