Insiders who bought Biohaven Ltd. (NYSE:BHVN) stock in the last 12 months were richly rewarded last week. The company's market value increased by US$317m as a result of the stock's 10% gain over the same period. As a result, their original purchase of US$43.3m worth of stock is now worth US$60.7m.

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.

Biohaven Insider Transactions Over The Last Year

The Independent Director John Childs made the biggest insider purchase in the last 12 months. That single transaction was for US$10.0m worth of shares at a price of US$22.00 each. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$38.09. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.

While Biohaven insiders bought shares during the last year, they didn't sell. Their average price was about US$27.20. It is certainly positive to see that insiders have invested their own money in the company. However, we do note that they were buying at significantly lower prices than today's share price. 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!

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.

Insiders At Biohaven Have Bought Stock Recently

It's good to see that Biohaven insiders have made notable investments in the company's shares. Not only was there no selling that we can see, but they collectively bought US$20m worth of shares. This is a positive in our book as it implies some confidence.

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. Biohaven insiders own about US$444m worth of shares (which is 13% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The Biohaven Insider Transactions Indicate?

The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. But we don't feel the same about the fact the company is making losses. Along with the high insider ownership, this analysis suggests that insiders are quite bullish about Biohaven. One for the watchlist, at least! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. At Simply Wall St, we've found that Biohaven has 3 warning signs (1 is a bit unpleasant!) that deserve your attention before going any further with your analysis.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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 of direct interests only, but not derivative transactions or indirect interests.

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.

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