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 we'll take a look at whether insiders have been buying or selling shares in Galway Metals Inc. (CVE:GWM).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 Galway Metals
Notably, that recent purchase by President Robert Hinchcliffe was not the only time they bought Galway Metals shares this year. Earlier in the year, they paid CA$0.17 per share in a CA$100k purchase. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of CA$0.29. 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.
Galway Metals insiders may have bought shares in the last year, but they didn't sell any. They paid about CA$0.19 on average. We don't deny that it is nice to see insiders buying stock in the company. But we must note that the investments were made at well below today's share price. You can see a visual depiction of insider transactions (by 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.
Galway Metals Insiders Bought Stock Recently
Over the last three months, we've seen a bit of insider buying at Galway Metals. President Robert Hinchcliffe bought CA$54k worth of shares in that time. We like it when there are only buyers, and no sellers. But in this case the amount purchased means the recent transaction may not be very meaningful on its own.
Does Galway Metals Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company 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. Galway Metals insiders own about CA$5.4m worth of shares. That equates to 15% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About Galway Metals Insiders?
It's certainly positive to see the recent insider purchase. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. Insiders likely see value in Galway Metals shares, given these transactions (along with notable insider ownership of the company). Along with insider transactions, I recommend checking if Galway Metals is growing revenue. This free chart of historic revenue and earnings should make that easy.
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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.