We often see insiders buying up shares in companies that perform well over the long term. 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 before you buy or sell Profound Medical Corp. (TSE:PRN), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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.
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'.
The Last 12 Months Of Insider Transactions At Profound Medical
In the last twelve months, the biggest single sale by an insider was when the insider, Rashed Dewan, sold CA$175k worth of shares at a price of CA$14.00 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of CA$26.18. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. This single sale was 71% of Rashed Dewan's stake. Rashed Dewan was the only individual insider to sell over the last year.
Over the last year, we can see that insiders have bought 6.60k shares worth CA$101k. But insiders sold 12.50k shares worth CA$175k. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like Profound Medical better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insider Ownership of Profound Medical
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 1.5% of Profound Medical shares, worth about CA$7.0m, according to our data. Whilst better than nothing, we're not overly impressed by these holdings.
So What Do The Profound Medical Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Profound Medical shares in the last quarter. We don't take much encouragement from the transactions by Profound Medical insiders. And usually insiders own more stock in the company, according to our data. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. Be aware that Profound Medical is showing 2 warning signs in our investment analysis, and 1 of those is potentially serious...
Of course Profound Medical may not be the best stock to buy. So you may wish to see this free collection of high quality 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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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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