It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Deepak Nitrite Limited (NSE:DEEPAKNI), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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.
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. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At Deepak Nitrite
Over the last year, we can see that the biggest insider purchase was by Chairman & MD Deepak Mehta for ₹83m worth of shares, at about ₹276 per share. So it's clear an insider wanted to buy, at around the current price, which is ₹276. That means they have been optimistic about the company in the past, though they may have changed their mind. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. In this case we're pleased to report that the insider bought shares at close to current prices. Deepak Mehta was the only individual insider to buy shares in the last twelve months.
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!
Deepak Nitrite is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of Deepak Nitrite
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. We usually like to see fairly high levels of insider ownership. Deepak Nitrite insiders own about ₹6.4b worth of shares. That equates to 17% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About Deepak Nitrite Insiders?
It is good to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. Once you factor in the high insider ownership, it certainly seems like insiders are positive about Deepak Nitrite. One for the watchlist, at least! Of course, the future is what matters most. So if you are interested in Deepak Nitrite, you should check out this free report on analyst forecasts for the company.
But note: Deepak Nitrite may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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 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.