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 before you buy or sell Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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 don’t think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
The Last 12 Months Of Insider Transactions At Catalyst Pharmaceuticals
Over the last year, we can see that the biggest insider purchase was by Director Donald Denkhaus for US$149k worth of shares, at about US$2.48 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$4.99. Because it occurred at a lower valuation, it doesn’t tell us much about whether insiders might find today’s price attractive.
In the last twelve months insiders paid US$372k for 150k shares purchased. In the last twelve months Catalyst Pharmaceuticals insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
Insiders at Catalyst Pharmaceuticals Have Bought Stock Recently
Over the last three months, we’ve seen significant insider buying at Catalyst Pharmaceuticals. Co-Founder Patrick McEnany spent US$81k on stock, and there wasn’t any selling. This is a positive in our book as it implies some confidence.
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. Catalyst Pharmaceuticals insiders own about US$35m worth of shares. That equates to 6.9% 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 Catalyst Pharmaceuticals Tell Us?
The recent insider purchase is heartening. We also take confidence from the longer term picture of insider transactions. But on the other hand, the company made a loss last year, which makes us a little cautious. Insiders likely see value in Catalyst Pharmaceuticals shares, given these transactions (along with notable insider ownership of the company). Of course, the future is what matters most. So if you are interested in Catalyst Pharmaceuticals, you should check out this free report on analyst forecasts for the company.
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, but not derivative transactions.
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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.