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 Pro Medicus Limited (ASX:PME), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Check out our latest analysis for Pro Medicus
Pro Medicus Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Co-Founder Anthony Hall for AU$740k worth of shares, at about AU$18.27 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$26.02. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
In the last twelve months Pro Medicus insiders were buying shares, but not selling. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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.
Insiders at Pro Medicus Have Bought Stock Recently
Over the last three months, we've seen a bit of insider buying at Pro Medicus. Non-Executive Director Deena Shiff bought AU$50k worth of shares in that time. We like it when there are only buyers, and no sellers. However, in this case the amount invested recently is quite small.
Insider Ownership of Pro Medicus
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Pro Medicus insiders own 58% of the company, currently worth about AU$1.6b based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The Pro Medicus Insider Transactions Indicate?
We note a that there has been a bit of insider buying recently (but no selling). The net investment is not enough to encourage us much. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like Pro Medicus insiders think the business has merit. Therefore, you should definitely take a look at this FREE report showing analyst forecasts for Pro Medicus.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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