We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 we'll take a look at whether insiders have been buying or selling shares in EML Payments Limited (ASX:EML).
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, 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. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
EML Payments Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Group CEO Thomas Cregan for AU$4.6m worth of shares, at about AU$3.55 per share. That means that an insider was happy to buy shares at around the current price of AU$3.89. 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. 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. Happily, the EML Payments insiders decided to buy shares at close to current prices.
Over the last year, we can see that insiders have bought 1.54m shares worth AU$5.5m. But they sold 425000 shares for AU$1.6m. Overall, EML Payments insiders were net buyers during the last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
EML Payments is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
EML Payments Insiders Are Selling The Stock
We've seen more insider selling than insider buying at EML Payments recently. We note insiders cashed in AU$1.6m worth of shares. On the flip side, Independent Non-Executive Director Kirstin Ferguson spent AU$40k on purchasing shares. Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the company has been fully valued in recent months.
Insider Ownership of EML Payments
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that EML Payments insiders own 8.6% of the company, worth about AU$116m. 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 EML Payments Insider Transactions Indicate?
Unfortunately, there has been more insider selling of EML Payments stock, than buying, in the last three months. In contrast, they appear keener if you look at the last twelve months. And insider ownership remains quite considerable. So we're happy to look past recent trading. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Every company has risks, and we've spotted 4 warning signs for EML Payments you should know about.
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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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. Thank you for reading.