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Should You Take Comfort From Insider Transactions At Perfect Shape Medical Limited (HKG:1830)?

Simply Wall St

It is not uncommon to see companies perform well in the years after insiders buy shares. 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 before you buy or sell Perfect Shape Medical Limited (HKG:1830), you may well want to know whether insiders have been buying or selling.

Do Insider Transactions Matter?

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.

We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.'

See our latest analysis for Perfect Shape Medical

The Last 12 Months Of Insider Transactions At Perfect Shape Medical

Over the last year, we can see that the biggest insider purchase was by Founder Kong Au-Yeung for HK$11m worth of shares, at about HK$3.35 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being HK$2.57). 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 when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Kong Au-Yeung was the only individual insider to buy shares in the last twelve months.

Kong Au-Yeung bought a total of 6.0m shares over the year at an average price of HK$3.31. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

SEHK:1830 Recent Insider Trading, September 3rd 2019

Perfect Shape Medical 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 Perfect Shape Medical Boast High Insider Ownership?

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. It's great to see that Perfect Shape Medical insiders own 69% of the company, worth about HK$2.1b. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Perfect Shape Medical Tell Us?

The recent insider purchase is heartening. And the longer term insider transactions also give us confidence. Once you factor in the high insider ownership, it certainly seems like insiders are positive about Perfect Shape Medical. One for the watchlist, at least! I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.