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We often see insiders buying up shares in companies that perform well over the long term. 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 shareholders might well want to know whether insiders have been buying or selling shares in Reata Pharmaceuticals, Inc. (NASDAQ:RETA).
What Is Insider Buying?
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, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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’.
The Last 12 Months Of Insider Transactions At Reata Pharmaceuticals
In the last twelve months, the biggest single purchase by an insider was when Independent Director James Bass bought US$100k worth of shares at a price of US$59.33 per share. Although we like to see insider buying, we note that this large purchase was at significantly lower prices. The insider buying may not tell us much about how insiders feel about the current share price.
James Bass bought a total of 3.46k shares over the year at an average price of US$62.36. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Reata Pharmaceuticals is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Does Reata Pharmaceuticals Boast High Insider Ownership?
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It’s great to see that Reata Pharmaceuticals insiders own 20% of the company, worth about US$542m. 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 Reata Pharmaceuticals Insiders?
Insider purchases have outweighed sales, in the last three months. But overall the difference isn’t worth writing home about. However, our analysis of transactions over the last year is heartening. It would be great to see more insider buying, but overall it seems like Reata Pharmaceuticals insiders are reasonably well aligned (owning significant chunk of the company’s shares) and optimistic for the future. Of course, the future is what matters most. So if you are interested in Reata Pharmaceuticals, you should check out this free report on analyst forecasts for the company.
But note: Reata 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.
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 email@example.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.