We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Eton Pharmaceuticals, Inc. (NASDAQ:ETON), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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 don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
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The Last 12 Months Of Insider Transactions At Eton Pharmaceuticals
Over the last year, we can see that the biggest insider purchase was by President Sean Brynjelsen for US$60k worth of shares, at about US$6.00 per share. We do like to see buying, but this purchase was made at well below the current price of US$8.00. But because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
Happily, we note that in the last year insiders bought 40000 shares for a total of US$240k. In the last twelve months Eton Pharmaceuticals insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by 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!
Eton Pharmaceuticals is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Eton Pharmaceuticals insiders own about US$26m worth of shares. That equates to 19% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Eton Pharmaceuticals Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in Eton Pharmaceuticals and their transactions don't cause us concern. To put this in context, take a look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .
But note: Eton Pharmaceuticals 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.
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.