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Usually, when one insider buys stock, it might not be a monumental event. But when multiple insiders are buying like they did in the case of FreightCar America, Inc. (NASDAQ:RAIL), that sends out a positive message to the company's shareholders.
Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.
Our free stock report includes 2 warning signs investors should be aware of before investing in FreightCar America. Read for free now.
The Last 12 Months Of Insider Transactions At FreightCar America
Over the last year, we can see that the biggest insider purchase was by Executive Chairman of the Board James Meyer for US$251k worth of shares, at about US$10.74 per share. That means that an insider was happy to buy shares at above the current price of US$6.10. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. 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.
Happily, we note that in the last year insiders paid US$292k for 27.40k shares. But they sold 32.50k shares for US$270k. In the last twelve months there was more buying than selling by FreightCar America insiders. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
See our latest analysis for FreightCar America
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.
Insider Ownership
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. FreightCar America insiders own about US$18m worth of shares. That equates to 14% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At FreightCar America Tell Us?
The fact that there have been no FreightCar America insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. Overall we don't see anything to make us think FreightCar America insiders are doubting the company, and they do own shares. While it's good to be aware of 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. Case in point: We've spotted 2 warning signs for FreightCar America you should be aware of, and 1 of them can't be ignored.