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It is usually uneventful when a single insider buys stock. However, When quite a few insiders buy shares, as it happened in Design Therapeutics, Inc.'s (NASDAQ:DSGN) case, it's fantastic news for 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.
See our latest analysis for Design Therapeutics
The Last 12 Months Of Insider Transactions At Design Therapeutics
Over the last year, we can see that the biggest insider purchase was by Independent Director John Schmid for US$100k worth of shares, at about US$3.74 per share. Even though the purchase was made at a significantly lower price than the recent price (US$5.38), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
Design Therapeutics insiders may have bought shares in the last year, but they didn't sell any. They paid about US$3.12 on average. We don't deny that it is nice to see insiders buying stock in the company. However, you should keep in mind that they bought when the share price was meaningfully below today's levels. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Design Therapeutics is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that Design Therapeutics insiders own 16% of the company, worth about US$48m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Design Therapeutics Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. Overall we don't see anything to make us think Design Therapeutics insiders are doubting the company, and they do own shares. 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. Our analysis shows 4 warning signs for Design Therapeutics (2 are potentially serious!) and we strongly recommend you look at them before investing.