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Insiders who placed huge bets on Medifast, Inc. (NYSE:MED) earlier this year would be disappointed with the 6.5% drop

Insiders who bought US$712k worth of Medifast, Inc.'s (NYSE:MED) stock at an average buy price of US$139 over the last year may be disappointed by the recent 6.5% decrease in the stock. Insiders invest with the hopes of seeing their money grow in value over time. However, as a result of recent losses, their initial investment is now only worth US$605k, which is not what they expected.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

Check out our latest analysis for Medifast

Medifast Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by Lead Independent Director Jeffrey Brown for US$499k worth of shares, at about US$127 per share. That means that an insider was happy to buy shares at above the current price of US$118. 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. 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.

In the last twelve months insiders purchased 5.11k shares for US$712k. But they sold 1.15k shares for US$200k. In the last twelve months there was more buying than selling by Medifast insiders. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
insider-trading-volume

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).

Are Medifast Insiders Buying Or Selling?

Over the last three months, we've seen a bit of insider buying at Medifast. Insiders bought US$5.7k worth of shares in that time. It's good to see the insider buying, as well as the lack of recent sellers. But in this case the amount purchased means the recent transaction may not be very meaningful on its own.

Does Medifast 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. We usually like to see fairly high levels of insider ownership. Insiders own 1.5% of Medifast shares, worth about US$19m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Does This Data Suggest About Medifast Insiders?

We note a that there has been a bit of insider buying recently (but no selling). That said, the purchases were not large. But insiders have shown more of an appetite for the stock, over the last year. Insiders own shares in Medifast and we see no evidence to suggest they are worried about the future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Medifast. When we did our research, we found 3 warning signs for Medifast (2 are a bit concerning!) that we believe deserve your full attention.

But note: Medifast may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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