What happened

Shares of SmileDirectClub (NASDAQ:SDC) were skyrocketing 20.9% higher as of 11:16 a.m. EDT on Wednesday. The big jump came after regulatory filings to the Securities and Exchange Commission revealed significant purchases of the stock by key insiders.

So what

Insider buying can be a sign that good things are in store for a company. Investors are especially encouraged when top executives purchase large blocks of stock, indicating optimism about the future.

Smiling woman holding a clear orthodontic aligner

Image source: Getty Images.

In this case, SmileDirectClub CEO David Katzman bought nearly 1.3 million shares for roughly $10.3 million. His son, Jordan Katzman, a member of the company's board of directors, purchased 663,130 shares for around $5.3 million. SmileDirectClub CFO Kyle Wailes invested an additional $153,800 in the healthcare stock. Two other directors also bought smaller stakes. 

It's important to remember that executives and boards of directors can be very bullish about a company's prospects and still be dead wrong. However, insider buying is still a lot better than insiders bailing on a stock. And it just might hint that SmileDirectClub could be on the way to regaining the highs set earlier this year.

Now what

Ultimately, SmileDirectClub's financial performance is a lot more important than how much insiders are investing in the company. SmileDirectClub has expanded its relationships with insurers in the U.S. and partnered with a large insurer in Germany. It has also opened SmileShops inside major retailers' stores and in dentists' offices. The company's next quarterly update could indicate how well these efforts are paying off.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.