It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in Solution Dynamics Limited (NZSE:SDL).

Do Insider Transactions Matter?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.

We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.

See our latest analysis for Solution Dynamics

The Last 12 Months Of Insider Transactions At Solution Dynamics

Chairman John McMahon made the biggest insider purchase in the last 12 months. That single transaction was for NZ$102k worth of shares at a price of NZ$1.86 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being NZ$1.60). It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

In the last twelve months Solution Dynamics insiders were buying shares, but not selling. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

Solution Dynamics is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Insiders at Solution Dynamics Have Bought Stock Recently

It's good to see that Solution Dynamics insiders have made notable investments in the company's shares. Not only was there no selling that we can see, but they collectively bought NZ$136k worth of shares. This makes one think the business has some good points.

Insider Ownership of Solution Dynamics

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 35% of Solution Dynamics shares, worth about NZ$8.2m. 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 Solution Dynamics Insider Transactions Indicate?

The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. Insiders likely see value in Solution Dynamics shares, given these transactions (along with notable insider ownership of the company). So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. You'd be interested to know, that we found 2 warning signs for Solution Dynamics and we suggest you have a look.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.