We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Chembio Diagnostics, Inc. (NASDAQ:CEMI).
What Is Insider Buying?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 Chembio Diagnostics
Over the last year, we can see that the biggest insider sale was by the Chief Science & Technology Officer and Executive VP, Javan Esfandiari, for US$214k worth of shares, at about US$7.41 per share. We generally don’t like to see insider selling, but the lower the sale price, the more it concerns us. The silver lining is that this sell-down took place above the latest price (US$5.51). So it may not tell us anything about how insiders feel about the current share price. Javan Esfandiari was the only individual insider to sell shares in the last twelve months.
Over the last year, we can see that insiders have bought 35000 shares worth US$217k. But they sold 30000 for US$214k. In the last twelve months there was more buying than selling by Chembio Diagnostics insiders. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Insiders at Chembio Diagnostics Have Sold Stock Recently
The last quarter saw substantial insider selling of Chembio Diagnostics shares. Specifically, Chief Science & Technology Officer and Executive VP Javan Esfandiari ditched US$214k worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the insiders think that the shares are a bargain.
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. It appears that Chembio Diagnostics insiders own 15% of the company, worth about US$14m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The Chembio Diagnostics Insider Transactions Indicate?
An insider sold Chembio Diagnostics shares recently, but they didn’t buy any. But we take heart from prior transactions. And insiders do own shares. So we’re happy enough to look past some selling. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Thank you for reading.