Simply Wall St

The recent decline in the market capitalization of Hua Medicine (Shanghai) Ltd. (HKG:2552) of HK$348 million means a loss of 109,000 Canadian yen for insiders who bought this year

The recent drop of 12% Hua Medicine (Shanghai) Ltd. (HKG:2552) The shares could be a blow to insiders who bought 3.1 million Canadian yen worth of shares at an average purchase price of 2.74 domestic yen over the past 12 months. Insiders buy in the hope that their investments will increase in value over time. However, due to recent losses, their initial investment is now only worth 3.0 million Canadian yen, which is not huge.

While we don’t think shareholders should simply follow insider trades, we think it makes perfect sense to keep an eye on what insiders are doing.

See our latest analysis for Hua Medicine (Shanghai)

Hua Medicine (Shanghai) Insider Trading Over the Last Year

Over the past year, we can see that the biggest insider buy was made by founder Li Chen for HK$2.9 million worth of shares, at around HK$2.76 per share. This means that even when the stock price was above HK$2.64 (the recent price), an insider wanted to buy stock. Their perspective may have changed since then, but it at least shows that they were feeling optimistic at the time. In our view, the price an insider pays for a stock is very important. Generally speaking, it catches our attention when an insider has bought stocks at prices higher than the current price, because it suggests that they thought the stock was worth buying, even at a higher price. Li Chen was the only individual insider to buy in the past year.

Li Chen bought 1.12 million shares over the past 12 months at an average price of HK$2.74. You can see a visual representation of insider trading (by companies and individuals) over the past 12 months, below. If you want to know exactly who sold, how much and when, just click on the chart below!

SEHK:2552 Insider Trading Volume November 23, 2022

There are many other companies whose insiders buy shares. You probably do not want to miss this free list of growing companies insiders are buying.

Does Hua Medicine (Shanghai) boast of high insider ownership?

I like to look at how many shares insiders own in a company, to help me get a sense of how aligned they are with insiders. High insider participation often makes company management more concerned with the interests of shareholders. Insiders hold 4.9% of Hua Medicine (Shanghai) shares, worth approximately HK$126 million. This level of insider ownership is good, but just short of being particularly noteworthy. This certainly suggests a reasonable degree of alignment.

So what does this data suggest about insiders at Hua Medicine (Shanghai)?

Good to see the recent insider buying. And longer-term insider trading also gives us confidence. But we don’t feel the same way about the company making losses. Once you factor in the strong insider ownership, it certainly seems like insiders are positive about Hua Medicine (Shanghai). Pleasant! So these insider trades can help us build a thesis on the stock, but it’s also helpful to know the risks this company faces. For example, we have identified 2 warning signs for Hua Medicine (Shanghai) (1 makes us a little uneasy) that you should be aware of.

But note: Hua Medicine (Shanghai) may not be the best stock to buy. So take a look at this free list of interesting companies with high ROE and low debt.

For the purposes of this article, insiders are persons who report their transactions to the relevant regulatory body. We currently record open market transactions and private dispositions, but not derivative transactions.

Valuation is complex, but we help make it simple.

Find out if Hua Medicine (Shanghai) is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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