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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 shareholders might well want to know whether insiders have been buying or selling shares in Lannett Company, Inc. (NYSE:LCI).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
Lannett Company Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Independent Chairman of the Board Patrick LePore for US$246k worth of shares, at about US$9.82 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$8.76). Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
Happily, we note that in the last year insiders paid US$526k for 65.00k shares. On the other hand they divested 27777 shares, for US$322k. Overall, Lannett Company insiders were net buyers last year. They paid about US$8.09 on average. It's great to see insiders putting their own cash into the company's stock, albeit at below the recent share price. 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!
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).
Insider Ownership of Lannett Company
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. It appears that Lannett Company insiders own 15% of the company, worth about US$52m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About Lannett Company Insiders?
It doesn't really mean much that no insider has traded Lannett Company shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in Lannett Company and we see no evidence to suggest they are worried about the future. Of course, the future is what matters most. So if you are interested in Lannett Company, you should check out this free report on analyst forecasts for the company.
But note: Lannett Company 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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