It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Skin Elements Limited (ASX:SKN).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.
The Last 12 Months Of Insider Transactions At Skin Elements
Executive Chairman & CEO Peter Malone made the biggest insider purchase in the last 12 months. That single transaction was for AU$84k worth of shares at a price of AU$0.01 each. Even though the purchase was made at a significantly lower price than the recent price (AU$0.016), 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.
While Skin Elements insiders bought shares last year, they didn't sell. They paid about AU$0.012 on average. We don't deny that it is nice to see insiders buying stock in the company. However, we do note that they were buying at significantly lower prices than today's share price. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Skin Elements 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.
Skin Elements Insiders Bought Stock Recently
Over the last quarter, Skin Elements insiders have spent a meaningful amount on shares. Overall, two insiders shelled out AU$97k for shares in the company -- and none sold. This makes one think the business has some good points.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Skin Elements insiders own about AU$770k 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 Do The Skin Elements Insider Transactions Indicate?
It is good to see recent purchasing. 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 Skin Elements shares, given these transactions (along with notable insider ownership of the company). So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. To help with this, we've discovered 7 warning signs (4 shouldn't be ignored!) that you ought to be aware of before buying any shares in Skin Elements.
But note: Skin Elements 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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.
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