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It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we’ll take a look at whether insiders have been buying or selling shares in Model N, Inc. (NYSE:MODN).
What Is Insider Buying?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
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’.
Check out our latest analysis for Model N
Model N Insider Transactions Over The Last Year
The , Zack Rinat, made the biggest insider sale in the last 12 months. That single transaction was for US$8.8m worth of shares at a price of US$17.00 each. That means that an insider was selling shares at slightly below the current price (US$18.10). We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it’s only a weak signal. This single sale was just 11.5% of Zack Rinat’s stake.
Happily, we note that in the last year insiders paid US$3.2m for 764k shares. But they sold 692k for US$12m. All up, insiders sold more shares in Model N than they bought, over the last year. The average sell price was around US$17.13. We don’t gain confidence from insider selling below the recent share price. Since insiders sell for many reasons, we wouldn’t put too much weight on it. 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!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Model N Insiders Are Selling The Stock
Over the last three months, we’ve seen significant insider selling at Model N. Specifically, insiders ditched US$510k 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 of Model N
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. It’s great to see that Model N insiders own 20% of the company, worth about US$119m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Model N Tell Us?
Insiders haven’t bought Model N stock in the last three months, but there was some selling. And our longer term analysis of insider transactions didn’t bring confidence, either. It is good to see high insider ownership, but the insider selling leaves us cautious. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Model N.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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 editorial-team@simplywallst.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.