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It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Polynovo Limited (ASX:PNV).
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, rules govern insider transactions, and certain disclosures are required.
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. 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 Polynovo
In the last twelve months, the biggest single purchase by an insider was when Non-Executive Chairman David Williams bought AU$270k worth of shares at a price of AU$0.54 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$1.83. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
Over the last year, we can see that insiders have bought 1.8m shares worth AU$988k. Polynovo may have bought shares in the last year, but they didn't sell any. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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.
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 12% of Polynovo shares, worth about AU$135m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Polynovo Tell Us?
It doesn't really mean much that no insider has traded Polynovo shares in the last quarter. However, our analysis of transactions over the last year is heartening. It would be great to see more insider buying, but overall it seems like Polynovo insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. Of course, the future is what matters most. So if you are interested in Polynovo, you should check out this free report on analyst forecasts for the company.
Of course Polynovo 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 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 email@example.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.