It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Vanda Pharmaceuticals Inc. (NASDAQ:VNDA).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
Vanda Pharmaceuticals Insider Transactions Over The Last Year
The insider, James Kelly, made the biggest insider sale in the last 12 months. That single transaction was for US$195k worth of shares at a price of US$10.76 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$13.77. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 13% of James Kelly's holding.
Vanda Pharmaceuticals insiders didn't buy any shares over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insider Ownership of Vanda Pharmaceuticals
Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Vanda Pharmaceuticals insiders own 2.9% of the company, worth about US$22m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About Vanda Pharmaceuticals Insiders?
The fact that there have been no Vanda Pharmaceuticals insider transactions recently certainly doesn't bother us. Our analysis of Vanda Pharmaceuticals insider transactions leaves us cautious. But we do like the fact that insiders own a fair chunk of the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example - Vanda Pharmaceuticals has 3 warning signs we think you should be aware of.
But note: Vanda 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.
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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What are the risks and opportunities for Vanda Pharmaceuticals?
Trading at 40.1% below our estimate of its fair value
Earnings are forecast to grow 42.5% per year
Significant insider selling over the past 3 months
Profit margins (2.5%) are lower than last year (12.8%)
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. 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.
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