Despite a 25% gain in Newlink Technology Inc.'s (HKG:9600) stock price this week, shareholders shouldn't let up. In spite of the relatively cheap prices, insiders made the decision to sell CN¥78m worth of stock in the last 12 months. This could be a warning indicator of vulnerabilities in the future.

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.

View our latest analysis for Newlink Technology

Newlink Technology Insider Transactions Over The Last Year

The insider, Yukai Yuan, made the biggest insider sale in the last 12 months. That single transaction was for HK$78m worth of shares at a price of HK$0.98 each. That means that even when the share price was below the current price of HK$2.60, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 37% of Yukai Yuan's holding. Yukai Yuan was the only individual insider to sell over the last year.

The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

I will like Newlink Technology better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Newlink Technology Insiders Are Selling The Stock

The last quarter saw substantial insider selling of Newlink Technology shares. In total, insider Yukai Yuan dumped HK$78m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Insider Ownership

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Newlink Technology insiders own about HK$1.2b worth of shares (which is 60% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Do The Newlink Technology Insider Transactions Indicate?

An insider sold stock recently, but they haven't been buying. And even if we look at the last year, we didn't see any purchases. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. 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. Every company has risks, and we've spotted 4 warning signs for Newlink Technology (of which 1 is concerning!) you should know about.

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.