Usually, when one insider buys stock, it might not be a monumental event. But when multiple insiders are buying like they did in the case of Rapid Micro Biosystems, Inc. (NASDAQ:RPID), that sends out a positive message to the company's shareholders.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for Rapid Micro Biosystems

In the last twelve months, the biggest single purchase by an insider was when Independent Director Richard Kollender bought US$50k worth of shares at a price of US$0.77 per share. That implies that an insider found the current price of US$0.83 per share to be enticing. Of course they may have changed their mind. But this suggests they are optimistic. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. Happily, the Rapid Micro Biosystems insiders decided to buy shares at close to current prices.

While Rapid Micro Biosystems insiders bought shares during the last year, they didn't sell. 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 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.

Over the last three months, we've seen significant insider buying at Rapid Micro Biosystems. Overall, four insiders shelled out US$142k for shares in the company -- and none sold. This makes one think the business has some good points.

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. Rapid Micro Biosystems insiders own about US$7.8m worth of shares. That equates to 22% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

It is good to see recent purchasing. And the longer term insider transactions also give us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Insiders likely see value in Rapid Micro Biosystems shares, given these transactions (along with notable insider ownership of 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. Case in point: We've spotted 2 warning signs for Rapid Micro Biosystems you should be aware of.

But note: Rapid Micro Biosystems 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.