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 we'll take a look at whether insiders have been buying or selling shares in Evolution Mining Limited (ASX:EVN).
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 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.
The Last 12 Months Of Insider Transactions At Evolution Mining
The Executive Chairman, Jacob Klein, made the biggest insider sale in the last 12 months. That single transaction was for AU$9.5m worth of shares at a price of AU$3.78 each. That means that an insider was selling shares at slightly below the current price (AU$4.18). When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. This single sale was just 18% of Jacob Klein's stake.
Over the last year, we note insiders sold 2780000 shares worth AU$11m. Insiders in Evolution Mining didn't buy any shares in the last year. 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at Evolution Mining Have Sold Stock Recently
The last quarter saw substantial insider selling of Evolution Mining shares. In total, insiders dumped AU$1.5m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with 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. Evolution Mining insiders own about AU$63m worth of shares. That equates to 0.9% 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 Evolution Mining Insiders?
Insiders haven't bought Evolution Mining stock in the last three months, but there was some selling. And even if we look to the last year, we didn't see any purchases. Insiders own shares, but we're still pretty cautious, given the history of sales. So we'd only buy after careful consideration. Of course, the future is what matters most. So if you are interested in Evolution Mining, you should check out this free report on analyst forecasts for the company.
Of course Evolution Mining may not be the best stock to buy. So you may wish to see this free collection of high quality 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.
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.