We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in NeuroPace, Inc. (NASDAQ:NPCE).
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 in the company. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. 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'.
The Last 12 Months Of Insider Transactions At NeuroPace
In the last twelve months, the biggest single purchase by an insider was when Chairman of the Board Frank Fischer bought US$850k worth of shares at a price of US$17.00 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$24.30. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
While NeuroPace insiders bought shares during the last year, they didn't sell. You can see a visual depiction of insider transactions (by companies and 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!
NeuroPace is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. NeuroPace insiders own about US$25m worth of shares. That equates to 4.2% of the company. 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 NeuroPace Insiders?
The fact that there have been no NeuroPace insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in NeuroPace and their transactions don't cause us concern. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing NeuroPace. Be aware that NeuroPace is showing 2 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...
But note: NeuroPace 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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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