It is not uncommon to see companies perform well in the years after insiders buy shares. 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 we'll take a look at whether insiders have been buying or selling shares in Lannett Company, Inc. (NYSE:LCI).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the 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 it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Lannett Company Insider Transactions Over The Last Year
Chairman of the Board Patrick LePore made the biggest insider purchase in the last 12 months. That single transaction was for US$246k worth of shares at a price of US$9.82 each. We do like to see buying, but this purchase was made at well below the current price of US$14.00. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
Happily, we note that in the last year insiders paid US$1.0m for 145k shares. But they sold 27777 for US$322k. In total, Lannett Company insiders bought more than they sold over the last year. They paid about US$7.10 on average. We don't deny that it is nice to see insiders buying stock in the company. However, we do note that they were buying at significantly lower prices than today's share price. 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).
Lannett Company Insiders Are Selling The Stock
There was substantially more insider selling, than buying, of Lannett Company shares over the last three months. In total, Director Albert Paonessa sold US$322k worth of shares in that time. On the flip side, Patrick LePore spent US$246k on purchasing shares. Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the company has been fully valued in recent months.
Insider Ownership of Lannett Company
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. 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 18% of Lannett Company shares, worth about US$97m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About Lannett Company Insiders?
The stark truth for Lannett Company is that there has been more insider selling than insider buying in the last three months. On the other hand, the insider transactions over the last year are encouraging. And insiders do own shares. So the recent selling doesn't worry us too much. Of course, the future is what matters most. So if you are interested in Lannett Company, you should check out this free report on analyst forecasts for the company.
But note: Lannett Company 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.
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.