Rainbow Children's Medicare Insiders Sell ₹102m Of Stock, Possibly Signalling Caution

Rainbow Children's Medicare Limited (NSE:RAINBOW) shareholders may have reason to be concerned, as several insiders sold their shares over the past year. Knowing whether insiders are buying is usually more helpful when evaluating insider transactions, as insider selling can have various explanations. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

Check out our latest analysis for Rainbow Children's Medicare

The Last 12 Months Of Insider Transactions At Rainbow Children's Medicare

The Founder Ramesh Kancharla made the biggest insider purchase in the last 12 months. That single transaction was for ₹28m worth of shares at a price of ₹1,225 each. Even though the purchase was made at a significantly lower price than the recent price (₹1,469), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.

Over the last year we saw more insider selling of Rainbow Children's Medicare shares, than buying. You can see a visual depiction of insider transactions (by companies and 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!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Rainbow Children's Medicare Insiders Are Selling The Stock

The last three months saw significant insider selling at Rainbow Children's Medicare. Specifically, insiders ditched ₹91m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Insider Ownership

Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Rainbow Children's Medicare insiders own about ₹70b worth of shares (which is 47% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

What Might The Insider Transactions At Rainbow Children's Medicare Tell Us?

Insiders sold Rainbow Children's Medicare shares recently, but they didn't buy any. Zooming out, the longer term picture doesn't give us much comfort. But it is good to see that Rainbow Children's Medicare is growing earnings. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. 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. Every company has risks, and we've spotted 1 warning sign for Rainbow Children's Medicare you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.