Analysts see warning sign in insider trades of construction firm IES Holdings

Simply Wall St believes IES Holdings shares are undervalued / Photo: iesresidentialinc.com

Over the past year, insiders of IES Holdings, a designer and installer of integrated systems, sold more than $150 million worth of company shares and did not purchase any, according to analysts at Simply Wall St. They warn that this could be a red flag. IES Holdings’ stock has been rising, gaining 152% over the last 12 months.

Details

Simply Wall St estimates that IES Holdings insiders sold $151.3 million worth of company shares over the past year and did not buy any. The most recent known transaction was made by IES Holdings CEO Jeffrey Gendell. On June 12, he sold part of his shares in the company for more than $3.3 million, as reported to the U.S. Securities and Exchange Commission (SEC).

So far, the largest transaction in the last 12 months was the sale of IES Holdings shares by its independent director Todd Cleveland, according to Simply Wall St. He sold the shares slightly below the current price, analysts note.

“We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable,” writes Simply Wall St.

Why insider transactions matter

On one hand, if several insiders are selling shares, it can be a red flag, according to Simply Wall St. Meanwhile, a high insider ownership stake in the company compels the management to pay closer attention to shareholders’ interests.

On the other hand, IES Holdings is making money and increasing its profits, Simply Wall St reminds. On May 3, the holding company reported the results of the second quarter of the fiscal year 2024 (ended March 31). Its revenue increased by 24% to $706 million, and operating profit rose by 146% to $77.7 million. Following this announcement, its shares reached a new record high, which was subsequently surpassed several times. Simply Wall St believes the company’s shares are still undervalued, estimating a fair value of $470.73 per share, which is 250% higher than the current market price.