Avid Bioservices, Inc. (NASDAQ:CDMO) insiders who bought shares over the past year were rewarded handsomely last week. The stock rose 25%, resulting in a US$141m rise in the company's market capitalisation, translating to a gain of 73% on their initial investment. Put another way, the original US$527.5k acquisition is now worth US$912.9k.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

The Last 12 Months Of Insider Transactions At Avid Bioservices

The Director Richard Hancock made the biggest insider purchase in the last 12 months. That single transaction was for US$202k worth of shares at a price of US$5.21 each. We do like to see buying, but this purchase was made at well below the current price of US$11.16. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.

Over the last year, we can see that insiders have bought 81.80k shares worth US$527k. But they sold 18.58k shares for US$137k. Overall, Avid Bioservices insiders were net buyers during the last year. Their average price was about US$6.45. To my mind it is good that insiders have invested their own money in the company. However, you should keep in mind that they bought when the share price was meaningfully below today's levels. 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 plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

Insider Ownership

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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. From our data, it seems that Avid Bioservices insiders own 1.1% of the company, worth about US$7.9m. Whilst better than nothing, we're not overly impressed by these holdings.

What Might The Insider Transactions At Avid Bioservices Tell Us?

It doesn't really mean much that no insider has traded Avid Bioservices shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. While we have no worries about the insider transactions, we'd be more comfortable if they owned more Avid Bioservices stock. While it's good to be aware of 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. In terms of investment risks, we've identified 2 warning signs with Avid Bioservices and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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