OSI Systems, Inc.'s (NASDAQ:OSIS) stock dropped 5.2% this week, offering solace to those who sold earlier in the year

Despite the fact that OSI Systems, Inc.'s (NASDAQ:OSIS) value has dropped 5.2% in the last week insiders who sold US$2.7m worth of stock in the past 12 months have had less success. Given that the average selling price of US$80.76 is still lower than the current share price, insiders would probably have been better off keeping their shares.

While insider transactions are not the most important thing when it comes to long-term investing, we do think it is perfectly logical to keep tabs on what insiders are doing.

Our analysis indicates that OSIS is potentially undervalued!

The Last 12 Months Of Insider Transactions At OSI Systems

In the last twelve months, the biggest single sale by an insider was when the Chairman, Deepak Chopra, sold US$1.6m worth of shares at a price of US$80.01 per share. That means that an insider was selling shares at slightly below the current price (US$83.91). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. We note that the biggest single sale was only 3.3% of Deepak Chopra's holding.

OSI Systems 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!

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OSI Systems Insiders Are Selling The Stock

The last three months saw significant insider selling at OSI Systems. In total, insiders sold US$923k 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 OSI Systems

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. OSI Systems insiders own 7.5% of the company, currently worth about US$106m based on the recent share price. 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 Does This Data Suggest About OSI Systems Insiders?

Insiders haven't bought OSI Systems stock in the last three months, but there was some selling. And there weren't any purchases to give us comfort, over the last year. But since OSI Systems is profitable and growing, we're not too worried by this. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about 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. To assist with this, we've discovered 3 warning signs that you should run your eye over to get a better picture of OSI Systems.

Of course OSI Systems may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.