We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell Emergent BioSolutions Inc. (NYSE:EBS), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At Emergent BioSolutions
The Independent Director, Zsolt Harsanyi, made the biggest insider sale in the last 12 months. That single transaction was for US$551k worth of shares at a price of US$68.90 each. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$53.27. So it may not tell us anything about how insiders feel about the current share price.
We note that in the last year insiders divested 15438 shares for a total of US$1.0m. Insiders in Emergent BioSolutions didn't buy any shares in the last year. You can see a visual depiction of insider transactions (by 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!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insiders at Emergent BioSolutions Have Sold Stock Recently
Over the last three months, we've seen significant insider selling at Emergent BioSolutions. Specifically, Independent Director Kathryn Zoon ditched US$85k worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
Does Emergent BioSolutions 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. 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 Emergent BioSolutions insiders own 3.7% of the company, worth about US$102m. 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 Does This Data Suggest About Emergent BioSolutions Insiders?
An insider sold Emergent BioSolutions shares recently, but they didn't buy any. Looking to the last twelve months, our data doesn't show any insider buying. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. 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.
But note: Emergent BioSolutions 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.
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.