We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we'll take a look at whether insiders have been buying or selling shares in Nevro Corp. (NYSE:NVRO).
What Is Insider Selling?
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, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
Nevro Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Independent Lead Director, Michael DeMane, sold US$3.2m worth of shares at a price of US$152 per share. So it's clear an insider wanted to take some cash off the table, even slightly below the current price of US$154. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 5.4% of Michael DeMane's holding. Michael DeMane was the only individual insider to sell shares in the last twelve months.
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!
I will like Nevro better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Does Nevro 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 Nevro insiders own 1.9% of the company, worth about US$97m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Nevro Tell Us?
It doesn't really mean much that no insider has traded Nevro shares in the last quarter. Still, the insider transactions at Nevro in the last 12 months are not very heartening. The modest level of insider ownership is, at least, some comfort. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. While conducting our analysis, we found that Nevro has 2 warning signs and it would be unwise to ignore these.
Of course Nevro 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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