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The recent price decline of 49% in Guardant Health, Inc.'s (NASDAQ:GH) stock may have disappointed insiders who bought US$20m worth of shares at an average price of US$96.14 in the past 12 months. Insiders buy with the expectation to see their investments rise in value over a period of time. However, recent losses have rendered their above investment worth US$6.0m which is not ideal.
Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.
Guardant Health Insider Transactions Over The Last Year
The Co-Founder Helmy Eltoukhy made the biggest insider purchase in the last 12 months. That single transaction was for US$10m worth of shares at a price of US$98.75 each. That means that an insider was happy to buy shares at above the current price of US$28.82. Their view may have changed since then, but at least it shows they felt optimistic at the time. 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.
Guardant Health insiders may have bought shares in the last year, but they didn't sell any. 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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Many investors like to check how much of a company is owned by 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. Guardant Health insiders own about US$135m worth of shares (which is 4.6% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The Guardant Health Insider Transactions Indicate?
The fact that there have been no Guardant Health insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. It would be great to see more insider buying, but overall it seems like Guardant Health insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Guardant Health. In terms of investment risks, we've identified 2 warning signs with Guardant Health and understanding these should be part of your investment process.
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.
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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.