We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell TherapeuticsMD, Inc. (NASDAQ:TXMD), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
TherapeuticsMD Insider Transactions Over The Last Year
The Co-Founder Robert Finizio made the biggest insider purchase in the last 12 months. That single transaction was for US$198k worth of shares at a price of US$2.75 each. That means that an insider was happy to buy shares at above the current price of US$1.57. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
TherapeuticsMD insiders may have bought shares in the last year, but they didn't sell any. Their average price was about US$1.98. I'd consider this a positive as it suggests insiders see value at around the current price. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
TherapeuticsMD is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of TherapeuticsMD
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. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that TherapeuticsMD insiders own 9.9% of the company, worth about US$42m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Do The TherapeuticsMD Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. But insiders have shown more of an appetite for the stock, over the last year. Insiders do have a stake in TherapeuticsMD and their transactions don't cause us concern. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 3 warning signs for TherapeuticsMD you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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