Some of the losses seen by insiders who purchased US$372.5k worth of Rapid7, Inc. (NASDAQ:RPD) shares over the past year were recovered after the stock increased by 22% over the past week. The purchase, however, has proven to be a pricey bet, with losses currently totalling US$133k.

While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

The Last 12 Months Of Insider Transactions At Rapid7

Over the last year, we can see that the biggest insider purchase was by Executive Chairman Corey Thomas for US$200k worth of shares, at about US$13.82 per share. That means that even when the share price was higher than US$9.29 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. We always take careful note of the price insiders pay when purchasing shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

Happily, we note that in the last year insiders paid US$373k for 25.80k shares. On the other hand they divested 11.89k shares, for US$202k. Overall, Rapid7 insiders were net buyers during the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

Rapid7 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.

Have Rapid7 Insiders Traded Recently?

The last three months saw some Rapid7 insider selling. insider Scott Murphy only netted US$5.3k selling shares, in that period. Neither the lack of buying nor the presence of selling is heartening. But the selling simply isn't sufficiently substantial to be of much use as a signal.

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. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Rapid7 insiders own 1.9% of the company, worth about US$12m. 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 Rapid7 Insider Transactions Indicate?

We did not see any insider buying in the last three months, but we did see selling. However, the sales are not big enough to concern us at all. But insiders have shown more of an appetite for the stock, over the last year. Insiders do have a stake in Rapid7 and their transactions don't cause us concern. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 1 warning sign with Rapid7 and understanding it should be part of your investment process.

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.

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.