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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 shareholders might well want to know whether insiders have been buying or selling shares in ArQule, Inc. (NASDAQ:ARQL).
Do Insider Transactions Matter?
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.
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 Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
ArQule Insider Transactions Over The Last Year
Independent Director Ronald Lindsay made the biggest insider purchase in the last 12 months. That single transaction was for US$64k worth of shares at a price of US$2.67 each. Even though the purchase was made at a significantly lower price than the recent price (US$6.19), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn’t tell us much about what they think of current prices.
In the last twelve months insiders paid US$190k for 64157 shares purchased. While ArQule insiders bought shares last year, they didn’t sell. They paid about US$2.96 on average. To my mind it is good that insiders have invested their own money in the company. However, we do note that they were buying at significantly lower prices than today’s share price. You can see a visual depiction of insider transactions (by 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!
ArQule is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Many investors like to check how much of a company is owned by insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. From our data, it seems that ArQule insiders own 1.4% of the company, worth about US$9.4m. We do generally prefer see higher levels of insider ownership.
So What Do The ArQule Insider Transactions Indicate?
The fact that there have been no ArQule insider transactions recently certainly doesn’t bother us. On a brighter note, the transactions over the last year are encouraging. While we have no worries about the insider transactions, we’d be more comfortable if they owned more ArQule stock. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for ArQule.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.