Possible Signal As Editas Medicine Insiders Sell US$1.2m In Stock

Despite the fact that Editas Medicine, Inc. (NASDAQ:EDIT) stock rose 16% last week, insiders who sold US$1.2m worth of stock in the previous 12 months are likely to be better off. Selling at an average price of US$7.97, which is higher than the current price, may have been the wisest decision for these insiders as their investment would have been worth less now than when they sold.

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.

Check out our latest analysis for Editas Medicine

The Last 12 Months Of Insider Transactions At Editas Medicine

Over the last year, we can see that the biggest insider sale was by the President, Gilmore O’Neill, for US$733k worth of shares, at about US$9.42 per share. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$3.76. So it may not shed much light on insider confidence at current levels.

Over the last year we saw more insider selling of Editas Medicine shares, than buying. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

If you are like me, then you will not want to miss this free list of small cap stocks that are not only being bought by insiders but also have attractive valuations.

Editas Medicine Insiders Are Selling The Stock

The last quarter saw substantial insider selling of Editas Medicine shares. In total, insiders dumped US$71k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Insider Ownership

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. From looking at our data, insiders own US$1.1m worth of Editas Medicine stock, about 0.4% of the company. We prefer to see high levels of insider ownership.

What Might The Insider Transactions At Editas Medicine Tell Us?

Insiders sold Editas Medicine shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. When you combine this with the relatively low insider ownership, we are very cautious about the stock. So we'd only buy after very careful consideration. 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. In terms of investment risks, we've identified 2 warning signs with Editas Medicine and understanding them should be part of your investment process.

But note: Editas Medicine 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 of direct interests only, but not derivative transactions or indirect interests.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.