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Need To Know: Houghton Mifflin Harcourt Company (NASDAQ:HMHC) Insiders Have Been Buying Shares

Simply Wall St

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 before you buy or sell Houghton Mifflin Harcourt Company (NASDAQ:HMHC), you may well want to know whether insiders have been buying or selling.

Do Insider Transactions Matter?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.

Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.

View our latest analysis for Houghton Mifflin Harcourt

The Last 12 Months Of Insider Transactions At Houghton Mifflin Harcourt

Over the last year, we can see that the biggest insider purchase was by President John Lynch for US$1.0m worth of shares, at about US$8.89 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$5.33). 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. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

In the last twelve months Houghton Mifflin Harcourt insiders were buying shares, but not selling. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

NasdaqGS:HMHC Recent Insider Trading, October 1st 2019

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Insider Ownership

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. From looking at our data, insiders own US$4.6m worth of Houghton Mifflin Harcourt stock, about 0.7% of the company. We consider this fairly low insider ownership.

So What Do The Houghton Mifflin Harcourt Insider Transactions Indicate?

The fact that there have been no Houghton Mifflin Harcourt insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. We'd like to see bigger individual holdings. However, we don't see anything to make us think Houghton Mifflin Harcourt insiders are doubting the company. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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 editorial-team@simplywallst.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.