Should You Take Comfort From Insider Transactions At Unichem Laboratories Limited (NSE:UNICHEMLAB)?

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 Unichem Laboratories Limited (NSE:UNICHEMLAB), you may well want to know whether insiders have been buying or selling.

Do Insider Transactions Matter?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the 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'.

View our latest analysis for Unichem Laboratories

The Last 12 Months Of Insider Transactions At Unichem Laboratories

Over the last year, we can see that the biggest insider purchase was by Chairman & MD Prakash Mody for ₹6.4m worth of shares, at about ₹145 per share. We do like to see buying, but this purchase was made at well below the current price of ₹286. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.

In the last twelve months Unichem Laboratories insiders were buying shares, but not selling. 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!

Unichem Laboratories is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insider Ownership of Unichem Laboratories

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. Unichem Laboratories insiders own 54% of the company, currently worth about ₹11b based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Unichem Laboratories Tell Us?

It doesn't really mean much that no insider has traded Unichem Laboratories shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. With high insider ownership and encouraging transactions, it seems like Unichem Laboratories 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 2 warning signs (1 makes us a bit uncomfortable!) that you ought to be aware of before buying any shares in Unichem Laboratories.

Of course Unichem Laboratories 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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