OPKO Health, Inc. (NASDAQ:OPK) insiders need another US$3.9m to breakeven on a US$13m stock purchase even after recent gains

Insiders who bought US$13m worth of OPKO Health, Inc. (NASDAQ:OPK) stock in the last year recovered part of their losses as the stock rose by 5.5% last week. However, total losses seen by insiders are still US$3.9m but in since the time of purchase.

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

Before we look at these insider transactions though, you might like to know that our analysis indicates that OPK is potentially undervalued!

OPKO Health Insider Transactions Over The Last Year

Notably, that recent purchase by Chairman & CEO Phillip Frost was not the only time they bought OPKO Health shares this year. They previously made an even bigger purchase of US$2.3m worth of shares at a price of US$3.09 per share. That means that even when the share price was higher than US$1.91 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

In the last twelve months OPKO Health insiders were buying shares, but not selling. Their average price was about US$2.71. This is nice to see since it implies that insiders might see value around current prices. 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!

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

OPKO Health Insiders Bought Stock Recently

Over the last quarter, OPKO Health insiders have spent a meaningful amount on shares. We can see that Chairman & CEO Phillip Frost paid US$2.5m for shares in the company. No-one sold. This makes one think the business has some good points.

Does OPKO Health Boast High Insider Ownership?

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that OPKO Health insiders own 45% of the company, worth about US$670m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Does This Data Suggest About OPKO Health Insiders?

The recent insider purchase is heartening. And the longer term insider transactions also give us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. When combined with notable insider ownership, these factors suggest OPKO Health insiders are well aligned, and quite possibly think the share price is too low. That's what I like to see! 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. Case in point: We've spotted 2 warning signs for OPKO Health you should be aware of.

But note: OPKO Health 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, but not derivative transactions.

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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.