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It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Eton Pharmaceuticals, Inc. (NASDAQ:ETON).
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.’
Eton Pharmaceuticals Insider Transactions Over The Last Year
Director Mark Baum made the biggest insider purchase in the last 12 months. That single transaction was for US$60k worth of shares at a price of US$6.00 each. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$7.64. 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.
Happily, we note that in the last year insiders bought 40000 shares for a total of US$240k. In the last twelve months Eton 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. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
For a common shareholder, it is worth checking how many shares are held by company 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. Eton Pharmaceuticals insiders own about US$25m worth of shares. That equates to 19% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Eton Pharmaceuticals Tell Us?
The fact that there have been no Eton Pharmaceuticals insider transactions recently certainly doesn’t bother us. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in Eton Pharmaceuticals and their transactions don’t cause us concern. I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
But note: Eton Pharmaceuticals 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.
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 email@example.com. 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.