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 shareholders might well want to know whether insiders have been buying or selling shares in Rhinomed Limited (ASX:RNO).
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
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. 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'.
Rhinomed Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when insider W. George bought AU$1.9m worth of shares at a price of AU$0.22 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.14). It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for shares. 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. Notably W. George was also the biggest seller.
Happily, we note that in the last year insiders paid AU$2.7m for 14.71m shares. But insiders sold 1.66m shares worth AU$118k. In total, Rhinomed insiders bought more than they sold over the last year. They paid about AU$0.18 on average. I'd consider this a positive as it suggests insiders see value at around the current price. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. 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.
Does Rhinomed Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. It's great to see that Rhinomed insiders own 59% of the company, worth about AU$21m. 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 Rhinomed Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Rhinomed shares in the last quarter. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like Rhinomed insiders think the business has merit. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. To that end, you should learn about the 5 warning signs we've spotted with Rhinomed (including 2 which are significant).
Of course Rhinomed may not be the best stock to buy. So you may wish to see this free collection of high quality 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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