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It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Prospa Group Limited (ASX:PGL), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. 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'.
Prospa Group Insider Transactions Over The Last Year
Earlier in the year, Non-Executive Director Aviad Eyal paid AU$0.78 per share in a AU$51k purchase. That means that an insider was happy to buy shares at around the current price of AU$0.88. 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. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. The good news for Prospa Group share holders is that insiders were buying at near the current price.
In the last twelve months Prospa Group insiders were buying shares, but not selling. They paid about AU$0.88 on average. This is nice to see since it implies that insiders might see value around current prices (around AU$0.88). 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!
Prospa Group 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.
Have Prospa Group Insiders Traded Recently?
There was only a small bit of insider buying, worth AU$1.7k, in the last three months. Looking at the net result, we don't think these recent trades shed much light on how insiders, as a group, are feeling about the company's prospects.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Prospa Group insiders own about AU$82m worth of shares (which is 58% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About Prospa Group Insiders?
Insider purchases may have been minimal, in the last three months, but there was no selling at all. That said, the purchases were not large. 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 Prospa Group insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. Of course, the future is what matters most. So if you are interested in Prospa Group, you should check out this free report on analyst forecasts for the company.
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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