We often see insiders buying up shares in companies that perform well over the long term. 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 e-therapeutics plc (LON:ETX).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Check out our latest analysis for e-therapeutics
e-therapeutics Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when CEO & Executive Chairman Ahmad Mortazavi bought UK£200k worth of shares at a price of UK£0.12 per share. We do like to see buying, but this purchase was made at well below the current price of UK£0.15. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
While e-therapeutics insiders bought shares during the last year, they didn't sell. 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!
e-therapeutics is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Does e-therapeutics Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that e-therapeutics insiders own 52% of the company, worth about UK£33m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The e-therapeutics Insider Transactions Indicate?
It doesn't really mean much that no insider has traded e-therapeutics shares in the last quarter. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like e-therapeutics insiders think the business has merit. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To help with this, we've discovered 3 warning signs (2 are a bit unpleasant!) that you ought to be aware of before buying any shares in e-therapeutics.
Of course e-therapeutics 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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About AIM:ETX
e-therapeutics
Engages in drug discovery research activities in the United Kingdom.
Adequate balance sheet and slightly overvalued.
