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Should You Take Comfort From Insider Transactions At Indra Sistemas, S.A. (BME:IDR)?

Simply Wall St

It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Indra Sistemas, S.A. (BME:IDR).

What Is Insider Selling?

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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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.

Check out our latest analysis for Indra Sistemas

Indra Sistemas Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Senior VP of Transport & Defence Business and Executive Director Ignacio Mataix Entero bought €152k worth of shares at a price of €7.70 per share. That means that an insider was happy to buy shares at around the current price of €9.43. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. Happily, the Indra Sistemas insiders decided to buy shares at close to current prices.

While Indra Sistemas insiders bought shares last year, they didn't sell. The average buy price was around €8.91. It's great to see insiders putting their own cash into the company's stock, albeit at below the recent share price. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

BME:IDR Recent Insider Trading, November 8th 2019

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

Insiders at Indra Sistemas Have Bought Stock Recently

It's good to see that Indra Sistemas insiders have made notable investments in the company's shares. Specifically, Senior VP of Transport & Defence Business and Executive Director Ignacio Mataix Entero bought €71k worth of shares in that time, and we didn't record any sales whatsoever. This could be interpreted as suggesting a positive outlook.

Insider Ownership

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Our data indicates that Indra Sistemas insiders own about €7.3m worth of shares (which is 0.4% of the company). We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!

What Might The Insider Transactions At Indra Sistemas Tell Us?

The recent insider purchase is heartening. We also take confidence from the longer term picture of insider transactions. On this analysis the only slight negative we see is the fairly low (overall) insider ownership; their transactions suggest that they are quite positive on Indra Sistemas stock. Of course, the future is what matters most. So if you are interested in Indra Sistemas, you should check out this free report on analyst forecasts for the company.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.

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.