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Should You Take Comfort From Insider Transactions At Medallion Financial Corp. (NASDAQ:MFIN)?

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·4 min read
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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. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Medallion Financial Corp. (NASDAQ:MFIN).

What Is Insider Buying?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

Check out our latest analysis for Medallion Financial

The Last 12 Months Of Insider Transactions At Medallion Financial

Over the last year, we can see that the biggest insider purchase was by insider David Orr for US$129k worth of shares, at about US$6.92 per share. Even though the purchase was made at a significantly lower price than the recent price (US$8.96), we still think insider buying is a positive. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.

While Medallion Financial insiders bought shares during the last year, they didn't sell. You can see a visual depiction of insider transactions (by companies and 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!

insider-trading-volume
insider-trading-volume

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Insiders at Medallion Financial Have Bought Stock Recently

It's good to see that Medallion Financial insiders have made notable investments in the company's shares. Not only was there no selling that we can see, but they collectively bought US$135k worth of shares. That shows some optimism about the company's future.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Medallion Financial insiders own 18% of the company, worth about US$41m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Does This Data Suggest About Medallion Financial Insiders?

It is good to see recent purchasing. And an analysis of the transactions over the last year also gives us confidence. But we don't feel the same about the fact the company is making losses. Given that insiders also own a fair bit of Medallion Financial we think they are probably pretty confident of a bright future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Medallion Financial. Every company has risks, and we've spotted 2 warning signs for Medallion Financial (of which 1 shouldn't be ignored!) you should know about.

But note: Medallion Financial 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.

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. 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.

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