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 before you buy or sell PuraPharm Corporation Limited (HKG:1498), you may well want to know whether insiders have been buying or selling.

What Is Insider Buying?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the 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 it is perfectly logical to keep tabs on what insiders are doing. 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 PuraPharm

PuraPharm Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the Founder, Yu Ling Chan, sold HK$30m worth of shares at a price of HK$2.00 per share. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. The silver lining is that this sell-down took place above the latest price (HK$0.91). So it may not tell us anything about how insiders feel about the current share price. Yu Ling Chan was the only individual insider to sell shares in the last twelve months.

In the last twelve months insiders purchased 30.54m shares for HK$60m. On the other hand they divested 15000000 shares, for HK$30m. Overall, PuraPharm insiders were net buyers last year. 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!

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.

Insider Ownership of PuraPharm

For a common shareholder, it is worth checking how many shares are held by company 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. It's great to see that PuraPharm insiders own 43% of the company, worth about HK$102m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Do The PuraPharm Insider Transactions Indicate?

The fact that there have been no PuraPharm insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. With high insider ownership and encouraging transactions, it seems like PuraPharm insiders think the business has merit. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.

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.