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Should You Take Comfort From Insider Transactions At Estia Health Limited (ASX:EHE)?

Simply Wall St

We often see insiders buying up shares in companies that perform well over the long term. 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 we'll take a look at whether insiders have been buying or selling shares in Estia Health Limited (ASX:EHE).

What Is Insider Buying?

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 Estia Health

The Last 12 Months Of Insider Transactions At Estia Health

In the last twelve months, the biggest single purchase by an insider was when CEO & MD Ian Thorley bought AU$121k worth of shares at a price of AU$2.42 per share. So it's clear an insider wanted to buy, at around the current price, which is AU$2.69. That means they have been optimistic about the company in the past, though they may have changed their mind. 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. In this case we're pleased to report that the insider purchases were made at close to current prices.

In the last twelve months insiders paid AU$187k for 74333 shares purchased. Estia Health insiders may have bought shares in the last year, but they didn't sell any. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

ASX:EHE Recent Insider Trading, August 14th 2019

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Does Estia Health Boast High Insider Ownership?

Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Estia Health insiders own 4.6% 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 Do The Estia Health Insider Transactions Indicate?

It doesn't really mean much that no insider has traded Estia Health shares in the last quarter. However, our analysis of transactions over the last year is heartening. Insiders own shares in Estia Health and we see no evidence to suggest they are worried about the future. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Estia Health.

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.