U.S. Markets closed

Should You Be Worried About Insider Transactions At Simulations Plus, Inc. (NASDAQ:SLP)?

Shawn Clark

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 Simulations Plus, Inc. (NASDAQ:SLP), 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 on the market. 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 it is perfectly logical to keep tabs on what insiders are doing. 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’.

Check out our latest analysis for Simulations Plus

Simulations Plus Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when Chief Financial Officer John Kneisel sold US$53k worth of shares at a price of US$17.64 per share. That means that even when the share price was below the current price of US$20.44, an insider wanted to cash in some shares. While sellers have a variety of reasons for selling, this isn’t particularly great to see. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. Please note, however, that this single sale was 100% of John Kneisel’s stake. John Kneisel 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!

NasdaqCM:SLP Insider Trading January 9th 19

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Simulations Plus insiders own about US$105m worth of shares (which is 31% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Do The Simulations Plus Insider Transactions Indicate?

There haven’t been any insider transactions in the last three months — that doesn’t mean much. While we feel good about high insider ownership of Simulations Plus, we can’t say the same about the selling of shares. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Simulations Plus.

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.

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 editorial-team@simplywallst.com.