We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Australian Pharmaceutical Industries Limited (ASX:API), you may well want to know whether insiders have been buying or selling.

What Is Insider Selling?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, rules govern insider transactions, and certain disclosures are required.

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 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’.

See our latest analysis for Australian Pharmaceutical Industries

The Last 12 Months Of Insider Transactions At Australian Pharmaceutical Industries

Over the last year, we can see that the biggest insider purchase was by Non-Executive Chairman Mark Smith for AU$107k worth of shares, at about AU$1.52 per share. That means that even when the share price was higher, an insider wanted to purchase shares. It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. We generally consider it a positive if insiders have been buying on market, even above the current price.

Happily, we note that in the last year insiders bought 185.00k shares for a total of AU$271k. Overall, Australian Pharmaceutical Industries insiders were net buyers last year. The average buy price was around AU$1.47. This is nice to see since it implies that insiders might see value around current prices (around AU$1.32). 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!

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.

Insiders at Australian Pharmaceutical Industries Have Bought Stock Recently

Over the last three months, we’ve seen significant insider buying at Australian Pharmaceutical Industries. We can see that Mark Smith paid AU$107k for shares in the company. No-one sold. This is a positive in our book as it implies some confidence.

Does Australian Pharmaceutical Industries Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Our data indicates that Australian Pharmaceutical Industries insiders own about AU$10m worth of shares (which is 1.6% of the company). Whilst better than nothing, we’re not overly impressed by these holdings.

What Might The Insider Transactions At Australian Pharmaceutical Industries Tell Us?

It is good to see recent insider purchase. We also take confidence from the longer term picture of insider transactions. Given that insiders also own a fair bit of Australian Pharmaceutical Industries we think they are probably pretty confident of a bright future. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Australian Pharmaceutical Industries.

If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.