Stock Analysis

As HCW Biologics Inc. (NASDAQ:HCWB) drops to US$48m market cap, insiders might rethink their US$687k stock purchase earlier this year

Source: Shutterstock

Insiders who bought US$687k worth of HCW Biologics Inc.'s (NASDAQ:HCWB) stock at an average buy price of US$2.51 over the last year may be disappointed by the recent 23% decrease in the stock. Insiders purchase with the hope of seeing their investments increase in value over time. However, due to recent losses, their initial investment is now only worth US$370k, which is not great.

While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

See our latest analysis for HCW Biologics

HCW Biologics Insider Transactions Over The Last Year

The Chief Financial Officer Rebecca Byam made the biggest insider purchase in the last 12 months. That single transaction was for US$230k worth of shares at a price of US$2.59 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$1.35). While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. We always take careful note of the price insiders pay when purchasing shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

HCW Biologics insiders may have bought shares in the last year, but they didn't sell any. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

NasdaqGM:HCWB Insider Trading Volume March 16th 2023

HCW Biologics 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 HCW Biologics Boast High 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. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that HCW Biologics insiders own 49% of the company, worth about US$24m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Do The HCW Biologics Insider Transactions Indicate?

The fact that there have been no HCW Biologics insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like HCW Biologics insiders think the business has merit. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. In terms of investment risks, we've identified 2 warning signs with HCW Biologics and understanding these should be part of your investment process.

But note: HCW Biologics 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.

Valuation is complex, but we're helping make it simple.

Find out whether HCW Biologics is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis