If insiders are selling large amounts of company stock, it can pay to approach the stock with caution. Insider sales can be a signal that the stock is overvalued or that the outlook for the company is deteriorating.
Here, we are going to flag some significant insider sales at MSC Industrial Direct Co Inc (MSM:US). MSC Industrial Direct is a US distributor of metalworking and maintenance, repair and operations (MRO) products and services. The company is listed on the New York Stock Exchange and currently has a market capitalization of $4.5 billion.
MSC Industrial Direct: Insider Selling
Our records show that recently, two top-level insiders have offloaded most of their stock here. On 21 January, Edward Martin, Senior Vice President of Sales sold 871 shares, reducing his holding to zero. Then, on 25 January, Doug Jones, Executive Vice President and Chief Supply Chain Officer sold 10,712 shares, reducing his holding to just 10 shares.
These insider sales look slightly concerning, in our view. It’s not often that we see two different insiders offload all their shares in a company within a short period of time. This selling pattern could be interpreted as a red flag because it shows that there is a consensus of opinion that the stock has limited upside at present. Our records show no insider buying at MSC Industrial Direct at all in the past two years.
It’s worth pointing out that both of the insiders have considerable industry experience. Martin, who joined MSC in 2019, previously spent 27 years with General Electric where he served as Chief Commercial Officer. Meanwhile, Jones has worked at MSC since 2001, serving in various senior roles. This means they are likely to have a good read on both the industry and MSC’s prospects.
Poor Q1 Results
MSC posted a disappointing set of first quarter results in early January.
For the quarter, net sales were $771.9 million, down 6.3% on the same period the year before. Meanwhile, operating income and diluted EPS came in at $53.9 million and $0.69 respectively, down 40.3% and 41.5% on the prior year.
The company’s recent share price trajectory does not seem to reflect this performance, however. Since late September, the stock has risen over 40%. Meanwhile, it has more than doubled since its March low.
We don’t know whether the insider selling here is a sign that the insiders see the stock as overvalued or whether they are concerned about another issue. Whatever the reason for the sales, we think caution is warranted towards MSC Industrial Direct stock at present, given that two insiders have sold all their stock.