We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in LifeMD, Inc. (NASDAQ:LFMD).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.
The Last 12 Months Of Insider Transactions At LifeMD
The Chief Operating Officer Brad Roberts made the biggest insider purchase in the last 12 months. That single transaction was for US$103k worth of shares at a price of US$20.50 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$8.65). Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
LifeMD insiders may have bought shares in the last year, but they didn't sell any. Their average price was about US$10.97. 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 click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
LifeMD is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
LifeMD Insiders Bought Stock Recently
It's good to see that LifeMD insiders have made notable investments in the company's shares. In total, insiders bought US$203k worth of shares in that time, and we didn't record any sales whatsoever. This makes one think the business has some good points.
Does LifeMD Boast High Insider Ownership?
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. LifeMD insiders own about US$37m worth of shares. That equates to 19% of the company. 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 LifeMD Insider Transactions Indicate?
It is good to see recent purchasing. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. Given that insiders also own a fair bit of LifeMD we think they are probably pretty confident of a bright future. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Be aware that LifeMD is showing 4 warning signs in our investment analysis, and 2 of those don't sit too well with us...
Of course LifeMD may not be the best stock to buy. So you may wish to see this free collection of high quality 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
