Insiders who bought US$357k worth of Praxis Precision Medicines, Inc. (NASDAQ:PRAX) stock in the last year have seen some of their losses recouped as the stock gained 13% last week. However, the purchase is proving to be a costly gamble, since losses made by insiders have totalled US$156k since the time of purchase.
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.
Praxis Precision Medicines Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when insider Marcio De'Souza bought US$151k worth of shares at a price of US$15.79 per share. That means that an insider was happy to buy shares at above the current price of US$2.34. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
While Praxis Precision Medicines insiders bought shares during the last year, they didn't sell. The average buy price was around US$4.16. This is nice to see since it implies that insiders might see value around current prices. The chart below shows insider transactions (by companies and 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!
Praxis Precision Medicines 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.
Insiders at Praxis Precision Medicines Have Bought Stock Recently
Over the last quarter, Praxis Precision Medicines insiders have spent a meaningful amount on shares. Overall, five insiders shelled out US$131k for shares in the company -- and none sold. This is a positive in our book as it implies some confidence.
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. We usually like to see fairly high levels of insider ownership. From looking at our data, insiders own US$1.9m worth of Praxis Precision Medicines stock, about 1.8% of the company. We prefer to see high levels of insider ownership.
What Might The Insider Transactions At Praxis Precision Medicines Tell Us?
It is good to see recent purchasing. And the longer term insider transactions also give us confidence. But on the other hand, the company made a loss during the last year, which makes us a little cautious. On this analysis the only slight negative we see is the fairly low (overall) insider ownership; their transactions suggest that they are quite positive on Praxis Precision Medicines stock. 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. To help with this, we've discovered 6 warning signs (3 can't be ignored!) that you ought to be aware of before buying any shares in Praxis Precision Medicines.
Of course Praxis Precision Medicines 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.