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 Pacific Edge Limited (NZSE:PEB), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At Pacific Edge
The insider, Eli Darling, made the biggest insider sale in the last 12 months. That single transaction was for NZ$258k worth of shares at a price of NZ$0.74 each. That means that even when the share price was below the current price of NZ$1.03, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 50% of Eli Darling's holding. Eli Darling was the only individual insider to sell shares in the last twelve months.
In the last twelve months insiders purchased 84.50k shares for NZ$15k. But they sold 350.00k shares for NZ$258k. The chart below shows insider transactions (by companies and individuals) over the last year. 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.
Are Pacific Edge Insiders Buying Or Selling?
We've only seen a tiny insider purchase valued at NZ$4.6k, in the last three months. Overall, we don't think these recent trades are particularly informative, one way or the other.
Does Pacific Edge Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Pacific Edge insiders own 8.1% of the company, worth about NZ$60m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The Pacific Edge Insider Transactions Indicate?
Insider purchases may have been minimal, in the last three months, but there was no selling at all. Overall the buying isn't worth writing home about. Our analysis of Pacific Edge insider transactions leaves us cautious. The modest level of insider ownership is, at least, some comfort. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 3 warning signs for Pacific Edge you should be aware of.
Of course Pacific Edge 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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Pacific Edge Limited, a cancer diagnostic company, researches, develops, and commercializes diagnostic and prognostic tools for the early detection and management of cancers in New Zealand, the United States, Australia, and Singapore.
Flawless balance sheet with limited growth.