We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Diploma PLC (LON:DPLM).
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, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Diploma Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by CEO & Director Jonathan Thomson for UK£297k worth of shares, at about UK£13.50 per share. That means that an insider was happy to buy shares at around the current price of UK£14.41. 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. Happily, the Diploma insider decided to buy shares at close to current prices. The only individual insider to buy over the last year was Jonathan Thomson.
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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Our data suggests Diploma insiders own 0.1% of the company, worth about UK£2.0m. I generally like to see higher levels of ownership.
So What Does This Data Suggest About Diploma Insiders?
It doesn't really mean much that no insider has traded Diploma shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. While we have no worries about the insider transactions, we'd be more comfortable if they owned more Diploma stock. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Diploma.
But note: Diploma 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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.