Have Insiders Been Buying SomnoMed Limited (ASX:SOM) Shares?

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So shareholders might well want to know whether insiders have been buying or selling shares in SomnoMed Limited (ASX:SOM).

Do Insider Transactions Matter?

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, most countries require that the company discloses such transactions to the market.

We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.

See our latest analysis for SomnoMed

The Last 12 Months Of Insider Transactions At SomnoMed

In the last twelve months, the biggest single purchase by an insider was when insider Peter Neustadt bought AU$204k worth of shares at a price of AU$0.80 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$1.92. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.

Over the last year, we can see that insiders have bought 498.00k shares worth AU$587k. But they sold 15.00k shares for AU$31k. In the last twelve months there was more buying than selling by SomnoMed insiders. Their average price was about AU$1.18. We don't deny that it is nice to see insiders buying stock in the company. However, you should keep in mind that they bought when the share price was meaningfully below today's levels. You can see the insider transactions (by companies and 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!

SomnoMed is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

SomnoMed Insiders Are Selling The Stock

We have seen a bit of insider selling at SomnoMed, over the last three months. CEO, MD & Director Neil Verdal-Austin divested only AU$31k worth of shares in that time. It's not great to see insider selling, nor the lack of recent buyers. But the volume sold is so low that it really doesn't bother us.

Insider Ownership of SomnoMed

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. A high insider ownership often makes company leadership more mindful of shareholder interests. Our data indicates that SomnoMed insiders own about AU$12m worth of shares (which is 7.6% of the company). However, it's possible that insiders might have an indirect interest through a more complex structure. We do generally prefer see higher levels of insider ownership.

What Might The Insider Transactions At SomnoMed Tell Us?

We did not see any insider buying in the last three months, but we did see selling. But the sales were small, so we're not concerned. However, our analysis of transactions over the last year is heartening. Overall we don't see anything to make us think SomnoMed insiders are doubting the company, and they do own shares. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. At Simply Wall St, we found 1 warning sign for SomnoMed that deserve your attention before buying any shares.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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