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 shareholders might well want to know whether insiders have been buying or selling shares in FlexShopper, Inc. (NASDAQ:FPAY).
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.
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.’
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The Last 12 Months Of Insider Transactions At FlexShopper
In the last twelve months, the biggest single purchase by an insider was when Independent Director T. King bought US$200k worth of shares at a price of US$1.00 per share. That means that an insider was happy to buy shares at above the current price. 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 generally consider it a positive if insiders have been buying on market, even above the current price.
Happily, we note that in the last year insiders bought 1.09m shares for a total of US$940k. In the last twelve months there was more buying than selling by FlexShopper insiders. The average buy price was around US$0.86. This is nice to see since it implies that insiders might see value around current prices (around US$0.76). 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!
FlexShopper is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insiders at FlexShopper Have Bought Stock Recently
Over the last quarter, FlexShopper insiders have spent a meaningful amount on shares. Howard Dvorkin spent US$369k on stock, and there wasn’t any selling. This makes one think the business has some good points.
Does FlexShopper Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Insiders own 33% of FlexShopper shares, worth about US$4.4m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The FlexShopper Insider Transactions Indicate?
It’s certainly positive to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. But we don’t feel the same about the fact the company is making losses. When combined with notable insider ownership, these factors suggest FlexShopper insiders are well aligned, and that they may think the share price is too low. Along with insider transactions, I recommend checking if FlexShopper is growing revenue. This free chart of historic revenue and earnings should make that easy.
Of course FlexShopper may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.