The recent 12% drop in Wellnex Life Limited's (ASX:WNX) stock could come as a blow to insiders who purchased AU$1.27m worth of stock at an average buy price of AU$0.80 over 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 AU$654.4k which is not ideal.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

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Wellnex Life Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by Non-Executive Director Jeffrey Yeh for AU$854k worth of shares, at about AU$0.65 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.41). 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. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

Wellnex Life insiders may have bought shares in the last year, but they didn't sell any. Their average price was about AU$0.80. This is nice to see since it implies that insiders might see value around current prices. 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!

See our latest analysis for Wellnex Life

Wellnex Life 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.

Wellnex Life Insiders Bought Stock Recently

Over the last quarter, Wellnex Life insiders have spent a meaningful amount on shares. Overall, three insiders shelled out AU$1.0m for shares in the company -- and none sold. This makes one think the business has some good points.

Insider Ownership Of Wellnex Life

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Wellnex Life insiders own 20% of the company, worth about AU$2.8m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

So What Does This Data Suggest About Wellnex Life Insiders?

The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. But on the other hand, the company made a loss during the last year, which makes us a little cautious. When combined with notable insider ownership, these factors suggest Wellnex Life 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. Our analysis shows 3 warning signs for Wellnex Life (2 are concerning!) and we strongly recommend you look at them before investing.

But note: Wellnex Life may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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.

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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.