Insider Traders Lose AU$68k As Ecofibre Drops
The recent price decline of 11% in Ecofibre Limited's (ASX:EOF) stock may have disappointed insiders who bought AU$271k worth of shares at an average price of AU$0.23 in the past 12 months. Insiders purchase with the hope of seeing their investments increase in value over time. However, due to recent losses, their initial investment is now only worth AU$203k, which is not great.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.
View our latest analysis for Ecofibre
Ecofibre Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by CEO, MD & Director Eric Wang for AU$133k worth of shares, at about AU$0.23 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.17). 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. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
Ecofibre insiders may have bought shares in the last year, but they didn't sell any. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Does Ecofibre 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. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Ecofibre insiders own 54% of the company, worth about AU$31m. 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 Do The Ecofibre Insider Transactions Indicate?
The fact that there have been no Ecofibre insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. It would be great to see more insider buying, but overall it seems like Ecofibre insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example, Ecofibre has 4 warning signs (and 2 which are significant) we think you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
