We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 shareholders might well want to know whether insiders have been buying or selling shares in Nanosonics Limited (ASX:NAN).

Do Insider Transactions Matter?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

View our latest analysis for Nanosonics

Nanosonics Insider Transactions Over The Last Year

The Non Executive Chairman of the Board, Maurie Stang, made the biggest insider sale in the last 12 months. That single transaction was for AU$5.2m worth of shares at a price of AU$4.16 each. So it's clear an insider wanted to take some cash off the table, even below the current price of AU$4.54. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 6.2% of Maurie Stang's holding.

We note that in the last year insiders divested 1.7m shares for a total of AU$6.9m. In the last year Nanosonics insiders didn't buy any company stock. 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!

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Insiders at Nanosonics Have Sold Stock Recently

The last three months saw significant insider selling at Nanosonics. In total, insiders dumped AU$6.5m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Insider Ownership of Nanosonics

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with 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. Nanosonics insiders own 17% of the company, currently worth about AU$229m based on the recent share price. 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 Does This Data Suggest About Nanosonics Insiders?

Insiders sold Nanosonics shares recently, but they didn't buy any. And even if we look to the last year, we didn't see any purchases. On the plus side, Nanosonics makes money, and is growing profits. It is good to see high insider ownership, but the insider selling leaves us cautious. Of course, the future is what matters most. So if you are interested in Nanosonics, you should check out this free report on analyst forecasts for the company.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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 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. Thank you for reading.