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Should You Take Comfort From Insider Transactions At Avanos Medical, Inc. (NYSE:AVNS)?

Simply Wall St

It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Avanos Medical, Inc. (NYSE:AVNS), you may well want to know whether insiders have been buying or selling.

Do Insider Transactions Matter?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.

Insider transactions are not the most important thing when it comes to long-term investing. 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.'

View our latest analysis for Avanos Medical

Avanos Medical Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by CEO & Director Joseph Woody for US$152k worth of shares, at about US$43.35 per share. That means that even when the share price was higher than US$38.39 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

Happily, we note that in the last year insiders bought 10000 shares for a total of US$427k. While Avanos Medical insiders bought shares last year, they didn't sell. 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!

NYSE:AVNS Recent Insider Trading, August 5th 2019

Avanos Medical is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insiders at Avanos Medical Have Bought Stock Recently

It's good to see that Avanos Medical insiders have made notable investments in the company's shares. Joseph Woody spent US$140k on stock, and there wasn't any selling. This makes one think the business has some good points.

Does Avanos Medical Boast High Insider Ownership?

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Avanos Medical insiders own about US$18m worth of shares. That equates to 1.0% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

What Might The Insider Transactions At Avanos Medical Tell Us?

The recent insider purchase is heartening. We also take confidence from the longer term picture of insider transactions. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Given that insiders also own a fair bit of Avanos Medical we think they are probably pretty confident of a bright future. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

Of course Avanos Medical 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.

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.