While Intra-Cellular Therapies, Inc. (NASDAQ:ITCI) shareholders have had a good week with the stock up 14%, they shouldn't let their guards down. Although prices were relatively low, insiders chose to sell US$860k worth of stock in the past 12 months. This could be a sign of impending weakness.
While insider transactions are not the most important thing when it comes to long-term investing, we do think it is perfectly logical to keep tabs on what insiders are doing.
The Last 12 Months Of Insider Transactions At Intra-Cellular Therapies
Over the last year, we can see that the biggest insider sale was by the EVP & Chief Commercial Officer, Mark Neumann, for US$860k worth of shares, at about US$55.02 per share. That means that an insider was selling shares at slightly below the current price (US$85.47). We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 34% of Mark Neumann's holding. Mark Neumann was the only individual insider to sell over the last year.
You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Intra-Cellular Therapies better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.
Insider Ownership
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Intra-Cellular Therapies insiders own about US$172m worth of shares (which is 2.1% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The Intra-Cellular Therapies Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Intra-Cellular Therapies insiders selling. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example - Intra-Cellular Therapies has 1 warning sign we think you should be aware of.
Of course Intra-Cellular Therapies 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 of direct interests only, but not derivative transactions or indirect interests.
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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.
