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Should You Take Comfort From Insider Transactions At Flexiroam Limited (ASX:FRX)?

Simply Wall St
·4 mins read

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Flexiroam Limited (ASX:FRX), you may well want to know whether insiders have been buying or selling.

What Is Insider Selling?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.

Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

View our latest analysis for Flexiroam

Flexiroam Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Founder Kenn Ong bought AU$246k worth of shares at a price of AU$0.02 per share. That means that even when the share price was higher than AU$0.018 (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. To us, it's very important to consider the price insiders pay for shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

In the last twelve months Flexiroam insiders were buying shares, but not selling. 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:FRX Insider Trading Volume July 12th 2020
ASX:FRX Insider Trading Volume July 12th 2020

Flexiroam 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.

Insider Ownership of Flexiroam

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. Flexiroam insiders own 71% of the company, currently worth about AU$3.9m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Flexiroam Tell Us?

The fact that there have been no Flexiroam insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. Judging from their transactions, and high insider ownership, Flexiroam insiders feel good about the company's future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To help with this, we've discovered 4 warning signs (3 shouldn't be ignored!) that you ought to be aware of before buying any shares in Flexiroam.

Of course Flexiroam 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.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.