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Should You Take Comfort From Insider Transactions At Austal Limited (ASX:ASB)?

Simply Wall St

It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So shareholders might well want to know whether insiders have been buying or selling shares in Austal Limited (ASX:ASB).

What Is Insider Selling?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.

We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.

Check out our latest analysis for Austal

Austal Insider Transactions Over The Last Year

While no particular insider transaction stood out, we can still look at the overall trading.

In the last twelve months Austal insiders were buying shares, but not selling. They paid about AU$2.99 on average. It is certainly positive to see that insiders have invested their own money in the company. However, you should keep in mind that they bought when the share price was meaningfully below today's levels, which is around AU$4.31. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

ASX:ASB Recent Insider Trading, October 2nd 2019

Austal is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Insiders at Austal Have Bought Stock Recently

There was some insider buying at Austal over the last quarter. Independent Non-Executive Director Charles Roland Everist shelled out AU$72k for shares in that time. It's great to see that insiders are only buying, not selling. But the amount invested in the last three months isn't enough for us too put much weight on it, as a single factor.

Does Austal Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Austal insiders own 2.0% of the company, worth about AU$32m. 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 Does This Data Suggest About Austal Insiders?

It is good to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. When combined with notable insider ownership, these factors suggest Austal insiders are well aligned, and that they may think the share price is too low. Of course, the future is what matters most. So if you are interested in Austal, you should check out this free report on analyst forecasts for the company.

Of course Austal 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, but not derivative transactions.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.