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Should You Take Comfort From Insider Transactions At Babcock International Group PLC (LON:BAB)?

Simply Wall St

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell Babcock International Group PLC (LON:BAB), you may well want to know whether insiders have been buying or selling.

What Is Insider Buying?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.

We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.'

View our latest analysis for Babcock International Group

The Last 12 Months Of Insider Transactions At Babcock International Group

CEO & Executive Director Archibald Bethel made the biggest insider purchase in the last 12 months. That single transaction was for UK£67k worth of shares at a price of UK£5.61 each. That means that even when the share price was higher than UK£5.42 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

Over the last year, we can see that insiders have bought 34000 shares worth UK£184k. Babcock International Group insiders may have bought shares in the last year, but they didn't sell any. You can see the insider transactions (by 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!

LSE:BAB Recent Insider Trading, September 11th 2019

Babcock International Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insider Ownership

Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Insiders own 0.3% of Babcock International Group shares, worth about UK£9.2m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

So What Does This Data Suggest About Babcock International Group Insiders?

The fact that there have been no Babcock International Group insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. The transactions are fine but it'd be more encouraging if Babcock International Group insiders bought more shares in the company. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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, 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.