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 shareholders might well want to know whether insiders have been buying or selling shares in Avadel Pharmaceuticals plc (NASDAQ:AVDL).
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. 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 Avadel Pharmaceuticals
Over the last year, we can see that the biggest insider purchase was by Non-Executive Chairman of the Board Geoffrey Glass for US$100k worth of shares, at about US$4.99 per share. Even though the purchase was made at a significantly lower price than the recent price (US$6.90), we still think insider buying is a positive. 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.
Over the last year, we can see that insiders have bought 66.50k shares worth US$351k. But insiders sold 3072 shares worth US$22k. In the last twelve months there was more buying than selling by Avadel Pharmaceuticals insiders. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insiders at Avadel Pharmaceuticals Have Bought Stock Recently
There has been significantly more insider buying, than selling, at Avadel Pharmaceuticals, over the last three months. In total, four insiders bought US$351k worth of shares in that time. But Senior Vice President of Quality & Regulatory Affairs Sandra Hatten sold shares worth US$22k. Insiders have spent more buying shares than they have selling, so on balance we think they are are probably optimistic.
Insider Ownership of Avadel Pharmaceuticals
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. From our data, it seems that Avadel Pharmaceuticals insiders own 3.4% of the company, worth about US$8.9m. We do generally prefer see higher levels of insider ownership.
What Might The Insider Transactions At Avadel Pharmaceuticals Tell Us?
The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that Avadel Pharmaceuticals insiders are expecting a bright future. 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: Avadel Pharmaceuticals 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.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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