We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell Enerflex Ltd. (TSE:EFX), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
The Last 12 Months Of Insider Transactions At Enerflex
Over the last year, we can see that the biggest insider purchase was by President Marc Rossiter for CA$249k worth of shares, at about CA$12.46 per share. That means that even when the share price was higher than CA$5.06 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. 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.
Enerflex insiders may have bought shares in the last year, but they didn't sell any. Their average price was about CA$9.27. These transactions suggest that insiders have considered the current price attractive. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart 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.
Are Enerflex Insiders Buying Or Selling?
Over the last three months, we've seen a bit of insider buying at Enerflex. Senior VP & General Counsel David Izett shelled out CA$13k for shares in that time. We like it when there are only buyers, and no sellers. But the amount invested in the last three months isn't enough for us too put much weight on it, as a single factor.
Does Enerflex 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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Our data suggests Enerflex insiders own 0.6% of the company, worth about CA$2.7m. I generally like to see higher levels of ownership.
So What Do The Enerflex Insider Transactions Indicate?
We note a that there has been a bit of insider buying recently (but no selling). That said, the purchases were not large. But insiders have shown more of an appetite for the stock, over the last year. We'd like to see bigger individual holdings. However, we don't see anything to make us think Enerflex insiders are doubting the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 3 warning signs for Enerflex you should be aware of, and 2 of them make us uncomfortable.
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.
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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