If insiders are selling large amounts of company stock, it can pay to approach that stock with caution. Insiders tend to have a good read on their companies’ future prospects and large sales can be a sign that they’re not confident about the future.
In this report, we are going to flag a large insider sale at Games Workshop Group PLC (GAW:LN). Games Workshop is a British manufacturer of miniature wargames. Its best-known products are Warhammer Age of Sigmar and Warhammer 40,000. The company is listed on the London Stock Exchange and currently has a market capitalization of £3.3 billion.
Games Workshop: Insider Selling
PDMR shareholding filings show that on 25 February, the wife of Games Workshop’s Chairman Nick Donaldson sold 8,000 GAW shares at a price of £97.21 per share. This sale generated proceeds of £777,680.
A Large Insider Sale
This is a substantial sale, both in nominal and relative terms. Before this sale, Mr. Donaldson and his wife owned 16,700 GAW shares. However, after this sale, they now only own 8,700 shares. This means the sale has reduced their holding by 48%. Our Insider Model views this director dealing activity as bearish.
It’s worth pointing out that Mr. Donaldson’s last sale, on 10 February 2020 (3,300 shares sold at a price of £71.78 per share), was timed very well. After this sale, the stock halved in price over the next six weeks.
1,800% Share Price Rise In Five Years
Games Workshop shares have enjoyed a phenomenal run over the last five years. Five years ago, the stock was changing hands for just over £5. Today, however, the share price is £98.50. That represents a five-year gain of more than 1,800%.
The company has grown substantially over this time. Between FY2015 and FY2020, sales climbed from £119 million to £270 million (CAGR: 18%). This year (the company’s financial year ends 31 May) sales are expected to come in £350 million.
However, a 1,800% gain seems excessive for that level of growth. At the current share price, the stock sports a price-to-sales ratio of 12.2 and a price-to-earnings ratio of 45.
Given that analysts expect sales growth to moderate in FY2022 to just 9%, we think caution is warranted here after this large insider sale.