We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Cara Therapeutics, Inc. (NASDAQ:CARA), you may well want to know whether insiders have been buying or selling.
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, most countries require that the company discloses such transactions to the market.
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. 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.
The Last 12 Months Of Insider Transactions At Cara Therapeutics
In the last twelve months, the biggest single sale by an insider was when the CFO & Chief Strategy Officer, Mani Mohindru, sold US$53k worth of shares at a price of US$21.39 per share. So what is clear is that an insider saw fit to sell at around the current price of US$19.13. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. In this case, the big sale took place at around the current price, so it's not too bad (but it's still not a positive). Mani Mohindru was the only individual insider to sell over the last year.
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!
I will like Cara Therapeutics better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Does Cara Therapeutics Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. It appears that Cara Therapeutics insiders own 2.2% of the company, worth about US$20m. 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 Cara Therapeutics Insiders?
It doesn't really mean much that no insider has traded Cara Therapeutics shares in the last quarter. Our analysis of Cara Therapeutics insider transactions leaves us cautious. But we do like the fact that insiders own a fair chunk of the company. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Cara Therapeutics.
But note: Cara Therapeutics 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.
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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. Thank you for reading.