As Elanco Animal Health Incorporated (NYSE:ELAN) drops to US$11b market cap, insiders might rethink their US$2.0m stock purchase earlier this year

The recent price decline of 6.4% in Elanco Animal Health Incorporated's (NYSE:ELAN) stock may have disappointed insiders who bought US$2.0m worth of shares at an average price of US$28.73 in the past 12 months. Insiders buy with the expectation to see their investments rise in value over a period of time. However, recent losses have rendered their above investment worth US$1.5m which is not ideal.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

See our latest analysis for Elanco Animal Health

The Last 12 Months Of Insider Transactions At Elanco Animal Health

In the last twelve months, the biggest single purchase by an insider was when President Jeffrey Simmons bought US$500k worth of shares at a price of US$29.70 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$22.27). It's very possible they regret the purchase, but it's more likely they are bullish about the company. 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.

While Elanco Animal Health insiders bought shares during the last year, they didn't sell. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

Elanco Animal Health is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Insiders at Elanco Animal Health Have Bought Stock Recently

It's good to see that Elanco Animal Health insiders have made notable investments in the company's shares. In total, insiders bought US$537k worth of shares in that time, and we didn't record any sales whatsoever. This is a positive in our book as it implies some confidence.

Insider Ownership

Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Elanco Animal Health insiders own 0.3% of the company, worth about US$33m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Do The Elanco Animal Health Insider Transactions Indicate?

The recent insider purchases are heartening. And an analysis of the transactions over the last year also gives us confidence. But we don't feel the same about the fact the company is making losses. When combined with notable insider ownership, these factors suggest Elanco Animal Health insiders are well aligned, and that they may think the share price is too low. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. While conducting our analysis, we found that Elanco Animal Health has 1 warning sign and it would be unwise to ignore it.

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, but not derivative transactions.

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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.