We wouldn't blame Powell Industries, Inc. (NASDAQ:POWL) shareholders if they were a little worried about the fact that Terry McKertcher, the Vice President of Operations recently netted about US$1.7m selling shares at an average price of US$557. That sale reduced their total holding by 40% which is hardly insignificant, but far from the worst we've seen.

Powell Industries Insider Transactions Over The Last Year

The insider, Frederick Mudge, made the biggest insider sale in the last 12 months. That single transaction was for US$1.8m worth of shares at a price of US$278 each. That means that even when the share price was below the current price of US$570, 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. We note that the biggest single sale was only 20% of Frederick Mudge's holding.

In the last year Powell Industries insiders didn't buy any company stock. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

If you are like me, then you will not want to miss this free list of small cap stocks that are not only being bought by insiders but also have attractive valuations.

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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Powell Industries insiders own 22% of the company, currently worth about US$1.5b based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Powell Industries Tell Us?

Insiders sold stock recently, but they haven't been buying. And even if we look at the last year, we didn't see any purchases. But it is good to see that Powell Industries is growing earnings. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. 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.

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.

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.