Insiders who bought US$3.40m worth of Portillo's Inc. (NASDAQ:PTLO) stock in the last year recovered part of their losses as the stock rose by 11% last week. The purchase, however, has proven to be a pricey bet, with losses currently totalling US$710k.

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 Portillo's

In the last twelve months, the biggest single purchase by an insider was when Independent Chairman of the Board Eugene Lee bought US$1.5m worth of shares at a price of US$5.18 per share. That means that even when the share price was higher than US$4.74 (the recent price), an insider wanted to purchase shares. 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. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

In the last twelve months Portillo's insiders were buying shares, but not selling. They paid about US$5.99 on average. This is nice to see since it implies that insiders might see value around current prices. 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!

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.

Portillo's Insiders Bought Stock Recently

It's good to see that Portillo's insiders have made notable investments in the company's shares. We can see that Independent Chairman of the Board Eugene Lee paid US$300k for shares in the company. No-one sold. This could be interpreted as suggesting a positive outlook.

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 6.7% of Portillo's shares, worth about US$22m. 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 Portillo's Insider Transactions Indicate?

The recent insider purchase is heartening. We also take confidence from the longer term picture of insider transactions. Insiders likely see value in Portillo's shares, given these transactions (along with notable insider ownership of the company). In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Portillo's. For example, Portillo's has 3 warning signs (and 1 which is concerning) we think you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.