Ideal Power Inc. (NASDAQ:IPWR) insiders who bought shares over the past year were rewarded handsomely last week. The stock rose 11%, resulting in a US$7.1m rise in the company's market capitalisation, translating to a gain of 119% on their initial investment. In other words, the original US$250.0k purchase is now worth US$548.2k.

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.

Ideal Power Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by CEO, President & Director David Somo for US$250k worth of shares, at about US$2.75 per share. Even though the purchase was made at a significantly lower price than the recent price (US$6.03), we still think insider buying is a positive. 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.

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.

Insider Ownership

Many investors like to check how much of a company is owned by 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. Our data indicates that Ideal Power insiders own about US$5.4m worth of shares (which is 7.6% of the company). We do generally prefer see higher levels of insider ownership.

So What Do The Ideal Power Insider Transactions Indicate?

The recent insider purchase is 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. On this analysis the only slight negative we see is the fairly low (overall) insider ownership; their transactions suggest that they are quite positive on Ideal Power stock. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company.

Of course Ideal Power may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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.