We often see insiders buying up shares in companies that perform well over the long term. 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 NeoPhotonics Corporation (NYSE:NPTN).
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
The Last 12 Months Of Insider Transactions At NeoPhotonics
Senior VP & GM Wupen Yuen made the biggest insider sale in the last 12 months. That single transaction was for US$204k worth of shares at a price of US$8.93 each. While the sale doesn’t make us feel confident, we do note it was conducted at a price well above the current share price, which is US$6.56. So it is hard to draw any strong conclusion from it. Wupen Yuen was the only individual insider to sell over the last year.
The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like NeoPhotonics better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insider Ownership of NeoPhotonics
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Our data indicates that NeoPhotonics insiders own about US$5.6m worth of shares (which is 1.8% of the company). Whilst better than nothing, we’re not overly impressed by these holdings.
So What Does This Data Suggest About NeoPhotonics Insiders?
It doesn’t really mean much that no insider has traded NeoPhotonics shares in the last quarter. The insider transactions at NeoPhotonics are not inspiring us to buy. We also note that, as far as we can see, insider ownership is fairly low, compared to other companies. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for NeoPhotonics.
But note: NeoPhotonics 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.
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