As Design Therapeutics, Inc.'s market cap (NASDAQ:DSGN) drops to US$650m, insiders might be questioning their decision to buy earlier this year

By
Simply Wall St
Published
January 25, 2022
NasdaqGS:DSGN
Source: Shutterstock

The recent 21% drop in Design Therapeutics, Inc.'s (NASDAQ:DSGN) stock could come as a blow to insiders who purchased US$1.2m worth of stock at an average buy price of US$20.00 over the past 12 months. This is not good as insiders invest based on expectations that their money will appreciate over time. However, as a result of recent losses, their original investment is now worth only US$712k.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for Design Therapeutics

The Last 12 Months Of Insider Transactions At Design Therapeutics

The Co-Founder & Executive Chairperson Pratik Shah made the biggest insider purchase in the last 12 months. That single transaction was for US$500k worth of shares at a price of US$20.00 each. That means that an insider was happy to buy shares at above the current price of US$11.76. Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

Design Therapeutics insiders may have bought shares in the last year, but they didn't sell any. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

insider-trading-volume
NasdaqGS:DSGN Insider Trading Volume January 25th 2022

Design Therapeutics is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Does Design Therapeutics 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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It's great to see that Design Therapeutics insiders own 30% of the company, worth about US$195m. 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 Do The Design Therapeutics Insider Transactions Indicate?

It doesn't really mean much that no insider has traded Design Therapeutics shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. With high insider ownership and encouraging transactions, it seems like Design Therapeutics insiders think the business has merit. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. When we did our research, we found 3 warning signs for Design Therapeutics (1 shouldn't be ignored!) that we believe deserve your full attention.

But note: Design Therapeutics 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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