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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Vermillion, Inc. (NASDAQ:VRML).
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.
We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. 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 Vermillion
In the last twelve months, the biggest single purchase by an insider was when Chief Financial Officer Robert Beechey bought US$52k worth of shares at a price of US$0.52 per share. Even though the purchase was made at a significantly lower price than the recent price (US$0.95), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
Happily, we note that in the last year insiders bought 321k shares for a total of US$178k. While Vermillion insiders bought shares last year, they didn't sell. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Have Vermillion Insiders Traded Recently?
There was some insider buying at Vermillion over the last quarter. Robert Beechey shelled out US$6.3k for shares in that time. It's great to see that insiders are only buying, not selling. But the amount invested in the last three months isn't enough for us too put much weight on it, as a single factor.
Many investors like to check how much of a company is owned by insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 40% of Vermillion shares, worth about US$28m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About Vermillion Insiders?
Our data shows a little insider buying, but no selling, in the last three months. Overall the buying isn't worth writing home about. On a brighter note, the transactions over the last year are encouraging. Insiders do have a stake in Vermillion and their transactions don't cause us concern. I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .
But note: Vermillion 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 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 firstname.lastname@example.org. 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.