We often see insiders buying up shares in companies that perform well over the long term. 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 before you buy or sell Medidata Solutions, Inc. (NASDAQ:MDSO), 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, rules govern insider transactions, and certain disclosures are required.
We don’t think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 Medidata Solutions
In the last twelve months, the biggest single sale by an insider was when Executive Vice President of Sales Michael Pray sold US$511k worth of shares at a price of US$73.02 per share. So we know that an insider sold shares at around the present share price of US$67.48. While their view may have changed since the sale, this is not a particularly positive fact. Arguably, insider selling at around current prices should give us reason to reflect on whether the stock is fully valued at the moment.
In the last twelve months insiders netted US$738k for 10.00k shares sold. In total, Medidata Solutions insiders sold more than they bought over the last year. The average sell price was around US$73.77. It’s not ideal to see that insiders have sold at around the current price. While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. You can see the insider transactions (by individuals) over the last year depicted in the chart 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 Medidata Solutions better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at Medidata Solutions Have Sold Stock Recently
The last quarter saw substantial insider selling of Medidata Solutions shares. Specifically, Michael Pray ditched US$511k worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the directors think that the shares are a bargain.
Does Medidata Solutions Boast High 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. Medidata Solutions insiders own 3.5% of the company, currently worth about US$138m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Medidata Solutions Insider Transactions Indicate?
An insider hasn’t bought Medidata Solutions stock in the last three months, but there was some selling. Looking to the last twelve months, our data doesn’t show any insider buying. But since Medidata Solutions is profitable and growing, we’re not too worried by this. The company boasts high insider ownership, but we’re a little hesitant, given the history of share sales. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Medidata Solutions.
But note: Medidata Solutions 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.