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 we'll take a look at whether insiders have been buying or selling shares in Saferoads Holdings Limited (ASX:SRH).
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, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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.'
The Last 12 Months Of Insider Transactions At Saferoads Holdings
Over the last year, we can see that the biggest insider purchase was by Founder Darren Hotchkin for AU$350k worth of shares, at about AU$0.35 per share. That means that an insider was happy to buy shares at above the current price of AU$0.21. It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
In the last twelve months insiders purchased 2.0m shares for AU$635k. On the other hand they divested 1.1m shares, for AU$380k. In total, Saferoads Holdings insiders bought more than they sold over the last year. The average buy price was around AU$0.31. This is nice to see since it implies that insiders might see value around current prices. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Saferoads Holdings Insiders Bought Stock Recently
Over the last quarter, Saferoads Holdings insiders have spent a meaningful amount on shares. Darren Hotchkin spent AU$136k on stock, and there wasn't any selling. That shows some optimism about the company's future.
Does Saferoads Holdings Boast High 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. Saferoads Holdings insiders own about AU$4.4m worth of shares (which is 57% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About Saferoads Holdings Insiders?
It is good to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. But on the other hand, the company made a loss last year, which makes us a little cautious. Along with the high insider ownership, this analysis suggests that insiders are quite bullish about Saferoads Holdings. One for the watchlist, at least! Along with insider transactions, I recommend checking if Saferoads Holdings is growing revenue. This free chart of historic revenue and earnings should make that easy.
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.
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If you spot an error that warrants correction, please contact the editor at email@example.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.