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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. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Psychemedics Corporation (NASDAQ:PMD), you may well want to know whether insiders have been buying or selling.
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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.
Psychemedics Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the VP of Finance, Neil Lerner, for US$137k worth of shares, at about US$15.11 per share. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$9.56. So it may not tell us anything about how insiders feel about the current share price.
Over the last year, we can see that insiders have bought 1500 shares worth US$15k. But insiders sold 18388 shares worth US$228k. All up, insiders sold more shares in Psychemedics than they bought, over the last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Our data indicates that Psychemedics insiders own about US$4.1m worth of shares (which is 7.7% of the company). We do generally prefer see higher levels of insider ownership.
So What Do The Psychemedics Insider Transactions Indicate?
The fact that there have been no Psychemedics insider transactions recently certainly doesn't bother us. We don't take much encouragement from the transactions by Psychemedics insiders. And we're not picking up on high enough insider ownership to give us any comfort. I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
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.
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.
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.