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Those following along with New Found Gold Corp. (CVE:NFG) will no doubt be intrigued by the recent purchase of shares by insider Eric Sprott, who spent a stonking CA$6.5m on stock at an average price of CA$12.85. While that only increased their holding size by 1.7%, it is still a big swing by our standards.
New Found Gold Insider Transactions Over The Last Year
In fact, the recent purchase by insider Eric Sprott was not their only acquisition of New Found Gold shares this year. They previously made an even bigger purchase of CA$14m worth of shares at a price of CA$5.25 per share. Even though the purchase was made at a significantly lower price than the recent price (CA$11.79), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
In the last twelve months insiders purchased 6.65m shares for CA$40m. But they sold 1.72m shares for CA$7.5m. Overall, New Found Gold insiders were net buyers during the last year. They paid about CA$6.08 on average. It is certainly positive to see that insiders have invested their own money in the company. However, we do note that they were buying at significantly lower prices than today's share price. The chart below shows insider transactions (by companies and 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!
New Found Gold 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.
Does New Found Gold Boast High 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. I reckon it's a good sign if insiders own a significant number of shares in the company. New Found Gold insiders own about CA$470m worth of shares (which is 26% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At New Found Gold Tell Us?
It is good to see recent purchasing. And an analysis of the transactions over the last year also gives us confidence. But we don't feel the same about the fact the company is making losses. When combined with notable insider ownership, these factors suggest New Found Gold insiders are well aligned, and quite possibly think the share price is too low. That's what I like to see! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Our analysis shows 2 warning signs for New Found Gold (1 is a bit concerning!) and we strongly recommend you look at them before investing.
But note: New Found Gold 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.
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.
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