Summit Therapeutics Inc. (NASDAQ:SMMT) insiders who bought shares over the past year were rewarded handsomely last week. The stock rose 14%, resulting in a US$372m rise in the company's market capitalisation, translating to a gain of 141% on their initial investment. As a result, their original purchase of US$5.84m worth of stock is now worth US$14.1m.

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

View our latest analysis for Summit Therapeutics

The Last 12 Months Of Insider Transactions At Summit Therapeutics

The COO, CFO & Director Manmeet Soni made the biggest insider purchase in the last 12 months. That single transaction was for US$5.0m worth of shares at a price of US$1.68 each. We do like to see buying, but this purchase was made at well below the current price of US$4.39. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.

In the last twelve months Summit Therapeutics insiders were buying shares, but not selling. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insiders At Summit Therapeutics Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at Summit Therapeutics. Not only was there no selling that we can see, but they collectively bought US$786k worth of shares. That shows some optimism about the company's future.

Does Summit Therapeutics Boast High 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. It's great to see that Summit Therapeutics insiders own 82% of the company, worth about US$2.3b. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Do The Summit Therapeutics Insider Transactions Indicate?

It's certainly positive to see the recent insider purchases. We also take confidence from the longer term picture of insider transactions. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. When combined with notable insider ownership, these factors suggest Summit Therapeutics insiders are well aligned, and quite possibly think the share price is too low. Nice! While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Every company has risks, and we've spotted 4 warning signs for Summit Therapeutics (of which 2 make us uncomfortable!) you should know about.

But note: Summit Therapeutics 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.

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.