Lemonade Reaches US$1.6b Market Cap Benefiting Insider Stock Buying

Lemonade, Inc. (NYSE:LMND) insiders who purchased shares in the last 12 months were richly rewarded last week. The stock climbed by 22% resulting in a US$289m addition to the company’s market value. In other words, the original US$470.1k purchase is now worth US$681.3k.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

See our latest analysis for Lemonade

Lemonade Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when CFO & Principal Accounting Officer Timothy Bixby bought US$305k worth of shares at a price of US$15.51 per share. Even though the purchase was made at a significantly lower price than the recent price (US$22.71), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.

Timothy Bixby bought 30.00k shares over the last 12 months at an average price of US$15.67. 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!

Lemonade is not the only stock insiders are buying. So take a peek at this free list of under-the-radar companies with insider buying.

Insiders At Lemonade Have Bought Stock Recently

Over the last three months, we've seen significantly more insider buying, than insider selling, at Lemonade. We can see that CFO & Principal Accounting Officer Timothy Bixby paid US$305k for shares in the company. But we did see insider selling worth US$54k. Insiders have spent more buying shares than they have selling, so on balance we think they are are probably optimistic.

Does Lemonade Boast High Insider Ownership?

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Lemonade insiders own about US$94m worth of shares. That equates to 5.8% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

What Might The Insider Transactions At Lemonade Tell Us?

The recent insider purchase is heartening. And an analysis of the transactions over the last year also gives us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Given that insiders also own a fair bit of Lemonade we think they are probably pretty confident of a bright future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 1 warning sign with Lemonade and understanding it should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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 of direct interests only, but not derivative transactions or indirect interests.

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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.

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