It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Computer Modelling Group Ltd. (TSE:CMG).
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, 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 logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
Computer Modelling Group Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when Independent Director Robert F. Smith sold CA$514k worth of shares at a price of CA$6.75 per share. That means that an insider was selling shares at below the current price (CA$6.83). Even though it doesn’t necessarily mean anything, that’s certainly not a positive sign, in our book. As a general rule we consider it to be discouraging when insiders are selling below the current price. Please note, however, that this single sale was 93.8% of Robert F. Smith’s stake.
Over the last year, we can see that insiders have bought 155.27k shares worth CA$1.2m. But they sold 198.40k for CA$1.7m. Over the last year we saw more insider selling of Computer Modelling Group shares, than buying. They sold for an average price of about CA$8.81. It is certainly not great to see that insiders have sold shares in the company. But we note that the selling, on average, was at well above the recently traded price of CA$6.83. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
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.
Insiders at Computer Modelling Group Have Bought Stock Recently
There has been significantly more insider buying, than selling, at Computer Modelling Group, over the last three months. Insiders spent CA$694k on shares. On the other hand, Robert F. Smith netted CA$514k by selling. We think insiders may be optimistic about the future, since insiders have been net buyers of shares.
Does Computer Modelling Group Boast High Insider Ownership?
Many investors like to check how much of a company is owned by 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. It appears that Computer Modelling Group insiders own 4.4% of the company, worth about CA$24m. 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 Computer Modelling Group Insiders?
The recent insider purchases are heartening. On the other hand the transaction history, over the last year, isn’t so positive. The more recent transactions are a positive, but Computer Modelling Group insiders haven’t shown the sustained enthusiasm that we look for, although they do own a decent number of shares, overall. Overall they seem reasonably aligned. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.