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Should You Take Comfort From Insider Transactions At NMC Health Plc (LON:NMC)?

Simply Wall St

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 before you buy or sell NMC Health Plc (LON:NMC), you may well want to know whether insiders have been buying or selling.

What Is Insider Buying?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.

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 Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

Check out our latest analysis for NMC Health

NMC Health Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by Independent Non-Executive Director Salma Ali Saif Bin Hareb Almheiri for UK£148k worth of shares, at about UK£26.99 per share. That means that even when the share price was higher than UK£21.57 (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. We always take careful note of the price insiders pay when purchasing shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

Happily, we note that in the last year insiders paid UK£198k for 7270 shares. On the other hand they divested 5620 shares, for UK£165k. In total, NMC Health insiders bought more than they sold over the last year. 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!

LSE:NMC Recent Insider Trading, August 25th 2019

NMC Health 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.

Does NMC Health Boast High Insider Ownership?

Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that NMC Health insiders own 48% of the company, worth about UK£2.2b. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

What Might The Insider Transactions At NMC Health Tell Us?

The fact that there have been no NMC Health insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. With high insider ownership and encouraging transactions, it seems like NMC Health insiders think the business has merit. 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 NMC Health 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.