Insiders Made Right Decision To Sell As Charmacy Pharmaceutical Dips 12%

By selling CN¥71m worth of Charmacy Pharmaceutical Co., Ltd. (HKG:2289) stock at an average sell price of CN¥7.29 over the last year, insiders seemed to have made the most of their holdings. The company's market valuation decreased by HK$175m after the stock price dropped 12% over the past week, but insiders were spared from painful losses.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

Check out our latest analysis for Charmacy Pharmaceutical

The Last 12 Months Of Insider Transactions At Charmacy Pharmaceutical

Over the last year, we can see that the biggest insider sale was by the Chairman & CEO, Chuanglong Yao, for HK$71m worth of shares, at about HK$7.29 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of HK$11.56. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 22% of Chuanglong Yao's holding. Chuanglong Yao was the only individual insider to sell over the last year.

The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Insider Ownership Of Charmacy Pharmaceutical

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. It appears that Charmacy Pharmaceutical insiders own 32% of the company, worth about HK$421m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

So What Does This Data Suggest About Charmacy Pharmaceutical Insiders?

It doesn't really mean much that no insider has traded Charmacy Pharmaceutical shares in the last quarter. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Charmacy Pharmaceutical insiders selling. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. To that end, you should learn about the 3 warning signs we've spotted with Charmacy Pharmaceutical (including 2 which are a bit unpleasant).

But note: Charmacy Pharmaceutical 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.

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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.