It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Avita Medical Limited (ASX:AVH).
What Is Insider Selling?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
The Last 12 Months Of Insider Transactions At Avita Medical
Over the last year, we can see that the biggest insider purchase was by Independent Non-Executive Director Damien McDonald for AU$89k worth of shares, at about AU$0.39 per share. That means that even when the share price was higher than AU$0.38 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
Avita Medical insiders may have bought shares in the last year, but they didn’t sell any. The average buy price was around AU$0.091. It is certainly positive to see that insiders have invested their own money in the company. But we must note that the investments were made at well below today’s share price. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Does Avita Medical Boast High 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. I reckon it’s a good sign if insiders own a significant number of shares in the company. Our data indicates that Avita Medical insiders own about AU$16m worth of shares (which is 2.0% of the company). Whilst better than nothing, we’re not overly impressed by these holdings.
What Might The Insider Transactions At Avita Medical Tell Us?
The fact that there have been no Avita Medical insider transactions recently certainly doesn’t bother us. But insiders have shown more of an appetite for the stock, over the last year. Insiders own shares in Avita Medical and we see no evidence to suggest they are worried about the future. In addition to knowing about insider transactions going on, it’s beneficial to identify the risks facing Avita Medical. At Simply Wall St, we found 3 warning signs for Avita Medical that deserve your attention before buying any shares.
But note: Avita Medical may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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, but not derivative transactions.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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