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 before you buy or sell Cipla Limited (NSE:CIPLA), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 it is perfectly logical to keep tabs on what insiders are doing. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
Cipla Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when Ranjana Pathak sold ₹7.2m worth of shares at a price of ₹656 per share. So we know that an insider sold shares at around the present share price of ₹514. They might be selling for a variety of reasons, but it’s hard to argue this is a bullish sign. We usually pause to reflect on the potential that a stock has a high valuation, if insiders have been selling at that price.
All up, insiders sold more shares in Cipla than they bought, over the last year. The average sell price was around ₹613. It’s not particularly great to see insiders were selling shares around current prices (shares recently traded at ₹514). While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. You can see a visual depiction of insider transactions 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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Cipla Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Cipla shares. Specifically, insiders ditched ₹15m worth of shares in that time, and we didn’t record any purchases whatsoever. Overall this makes us a bit cautious, but it’s not the be all and end all.
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Cipla insiders own about ₹2.1b worth of shares. That equates to 36% of the company. This level of insider ownership is good but just short of being particularly stand-out, but it certainly does suggest a reasonable degree of alignment.
So What Do The Cipla Insider Transactions Indicate?
Insiders sold Cipla shares recently, but they didn’t buy any. Zooming out, the longer term picture doesn’t give us much comfort. On the plus side, Cipla makes money, and is growing profits. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. We’d think twice before buying! If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.