We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we’ll take a look at whether insiders have been buying or selling shares in Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. 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 Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.
The Last 12 Months Of Insider Transactions At Madrigal Pharmaceuticals
Chairman & CEO Paul Friedman made the biggest insider purchase in the last 12 months. That single transaction was for US$496k worth of shares at a price of US$124 each. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being US$88.78). It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. To us, it’s very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
In the last twelve months Madrigal Pharmaceuticals insiders were buying shares, but not selling. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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.
Insider Ownership of Madrigal Pharmaceuticals
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Insiders own 6.3% of Madrigal Pharmaceuticals shares, worth about US$86m. 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 Does This Data Suggest About Madrigal Pharmaceuticals Insiders?
The fact that there have been no Madrigal Pharmaceuticals insider transactions recently certainly doesn’t bother us. But insiders have shown more of an appetite for the stock, over the last year. Overall we don’t see anything to make us think Madrigal Pharmaceuticals insiders are doubting the company, and they do own shares. Of course, the future is what matters most. So if you are interested in Madrigal Pharmaceuticals, you should check out this free report on analyst forecasts for the company.
But note: Madrigal Pharmaceuticals 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.