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As BridgeBio Pharma, Inc.'s market cap (NASDAQ:BBIO) drops to US$1.7b, insiders might be questioning their decision to buy earlier this year

Insiders who bought US$2.5m worth of BridgeBio Pharma, Inc.'s (NASDAQ:BBIO) stock at an average buy price of US$13.63 over the last year may be disappointed by the recent 8.7% decrease in the stock. Insiders buy with the expectation to see their investments rise in value over a period of time. However, recent losses have rendered their above investment worth US$2.0m which is not ideal.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

Check out our latest analysis for BridgeBio Pharma

BridgeBio Pharma Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by Independent Director James Momtazee for US$1.2m worth of shares, at about US$14.50 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$11.28). Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

Happily, we note that in the last year insiders paid US$2.5m for 180.31k shares. But they sold 11.75k shares for US$150k. Overall, BridgeBio Pharma insiders were net buyers during 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!

insider-trading-volume
insider-trading-volume

BridgeBio Pharma 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.

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. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that BridgeBio Pharma insiders own 6.5% of the company, worth about US$109m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The BridgeBio Pharma Insider Transactions Indicate?

The fact that there have been no BridgeBio Pharma insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Judging from their transactions, and high insider ownership, BridgeBio Pharma insiders feel good about the company's future. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. For example, BridgeBio Pharma has 3 warning signs (and 1 which is potentially serious) we think you should know about.

But note: BridgeBio Pharma 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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