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 we'll take a look at whether insiders have been buying or selling shares in Memphasys Limited (ASX:MEM).
What Is Insider Selling?
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.
We don't think shareholders should simply follow insider transactions. 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.
Memphasys Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Non-Executive Director Andrew Goodall for AU$850k worth of shares, at about AU$0.023 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$0.054. 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.
Andrew Goodall bought 37653365 shares over the last 12 months at an average price of AU$0.023. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
Memphasys is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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. It's great to see that Memphasys insiders own 43% of the company, worth about AU$17m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Memphasys Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Memphasys shares in the last quarter. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like Memphasys insiders think the business has merit. To put this in context, take a look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.
Of course Memphasys 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.
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.
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. Thank you for reading.