The recent price decline of 20% in Biomea Fusion, Inc.'s (NASDAQ:BMEA) stock may have disappointed insiders who bought US$156.0k worth of shares at an average price of US$6.93 in the past 12 months. Insiders purchase with the hope of seeing their investments increase in value over time. However, due to recent losses, their initial investment is now only worth US$130.3k, which is not great.

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 Biomea Fusion

Over the last year, we can see that the biggest insider purchase was by Independent Director Michael J. Hitchcock for US$101k worth of shares, at about US$10.06 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$5.79). While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. 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.

Biomea Fusion insiders may have bought shares in the last year, but they didn't sell any. Their average price was about US$6.93. I'd consider this a positive as it suggests insiders see value at around the current price. 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!

Biomea Fusion is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.

Biomea Fusion Insiders Bought Stock Recently

Over the last quarter, Biomea Fusion insiders have spent a meaningful amount on shares. We can see that Independent Director Michael J. Hitchcock paid US$101k for shares in the company. No-one sold. That shows some optimism about the company's future.

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. Insiders own 13% of Biomea Fusion shares, worth about US$28m. 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 Biomea Fusion Insiders?

It's certainly positive to see the recent insider purchase. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. Insiders likely see value in Biomea Fusion shares, given these transactions (along with notable insider ownership of the company). 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. At Simply Wall St, we've found that Biomea Fusion has 4 warning signs (2 don't sit too well with us!) that deserve your attention before going any further with your analysis.

Of course Biomea Fusion 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.