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 PharmAust Limited (ASX:PAA).
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, such insiders must disclose their trading activities, and not trade on inside information.
We don’t think shareholders should simply follow insider transactions. 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’.
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PharmAust Insider Transactions Over The Last Year
While no particular insider transaction stood out, we can still look at the overall trading.
Over the last year, we can see that insiders have bought 2.4m shares worth AU$104k. In the last twelve months PharmAust insiders were buying shares, but not selling. They paid about AU$0.044 on average. This is nice to see since it implies that insiders might see value around current prices (around AU$0.04). You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
PharmAust is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 19% of PharmAust shares, worth about AU$2.2m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At PharmAust Tell Us?
It doesn’t really mean much that no insider has traded PharmAust shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. Insiders do have a stake in PharmAust and their transactions don’t cause us concern. Along with insider transactions, I recommend checking if PharmAust is growing revenue. This free chart of historic revenue and earnings should make that easy.
But note: PharmAust 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.
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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.