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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 we'll take a look at whether insiders have been buying or selling shares in Infinera Corporation (NASDAQ:INFN).
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 on the market. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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.'
Infinera Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Director Marcel Gani for US$315k worth of shares, at about US$3.15 per share. That means that an insider was happy to buy shares at above the current price of US$3.14. It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
Happily, we note that in the last year insiders bought 325k shares for a total of US$1.2m. While Infinera insiders bought shares last year, they didn't sell. Their average price was about US$3.80. This is nice to see since it implies that insiders might see value around current prices. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
Infinera is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insiders at Infinera Have Bought Stock Recently
It's good to see that Infinera insiders have made notable investments in the company's shares. Overall, three insiders shelled out US$559k for shares in the company -- and none sold. This makes one think the business has some good points.
Insider Ownership of Infinera
Many investors like to check how much of a company is owned by 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. Infinera insiders own about US$13m worth of shares. That equates to 2.4% of the company. 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 Does This Data Suggest About Infinera Insiders?
It's certainly positive to see the recent insider purchases. And an analysis of the transactions over the last year also gives us confidence. But on the other hand, the company made a loss last year, which makes us a little cautious. When combined with notable insider ownership, these factors suggest Infinera insiders are well aligned, and that they may think the share price is too low. Of course, the future is what matters most. So if you are interested in Infinera, you should check out this free report on analyst forecasts for the company.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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.