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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 we’ll take a look at whether insiders have been buying or selling shares in Neuren Pharmaceuticals Limited (ASX:NEU).
Do Insider Transactions Matter?
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.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. 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 Neuren Pharmaceuticals
Independent Non-Executive Director Patrick Davies made the biggest insider purchase in the last 12 months. That single transaction was for AU$100k worth of shares at a price of AU$1.44 each. That means that even when the share price was higher than AU$1.15 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. In our view, the price an insider pays for shares is very important. 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.
Happily, we note that in the last year insiders bought 99730 shares for a total of AU$140k. Neuren Pharmaceuticals may have bought shares in the last year, but they didn’t sell any. 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!
Neuren Pharmaceuticals is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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. Insiders own 8.3% of Neuren Pharmaceuticals shares, worth about AU$9.5m, according to our data. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. We do generally prefer see higher levels of insider ownership.
So What Does This Data Suggest About Neuren Pharmaceuticals Insiders?
It doesn’t really mean much that no insider has traded Neuren Pharmaceuticals shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. While we have no worries about the insider transactions, we’d be more comfortable if they owned more Neuren Pharmaceuticals stock. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Neuren Pharmaceuticals.
But note: Neuren 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.
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.