We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Simulations Plus, Inc. (NASDAQ:SLP).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
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. 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'.
Simulations Plus Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Independent Director, John Paglia, for US$1.2m worth of shares, at about US$82.10 per share. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. The good news is that this large sale was at well above current price of US$51.54. So it is hard to draw any strong conclusion from it.
Simulations Plus insiders didn't buy any shares over the last year. 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 are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insider Ownership of Simulations Plus
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. Simulations Plus insiders own about US$235m worth of shares (which is 23% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About Simulations Plus Insiders?
It doesn't really mean much that no insider has traded Simulations Plus shares in the last quarter. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Simulations Plus insiders selling. 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. At Simply Wall St, we found 2 warning signs for Simulations Plus that deserve your attention before buying any shares.
But note: Simulations Plus 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. 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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