It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Natera, Inc. (NASDAQ:NTRA), 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.
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. 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.'
The Last 12 Months Of Insider Transactions At Natera
In the last twelve months, the biggest single sale by an insider was when the Co-Founder & Executive Chairman, Matthew Rabinowitz, sold US$5.1m worth of shares at a price of US$24.14 per share. That means that an insider was selling shares at slightly below the current price (US$32.62). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 11.5% of Matthew Rabinowitz's holding. The only individual insider seller over the last year was Matthew Rabinowitz.
You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Natera better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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. Natera insiders own 4.9% of the company, currently worth about US$112m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At Natera Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of Natera insider transactions don't fill us with confidence. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Natera.
Of course Natera 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 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. Thank you for reading.