We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 shareholders might well want to know whether insiders have been buying or selling shares in DroneShield Limited (ASX:DRO).
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, rules govern insider transactions, and certain disclosures are required.
We don’t think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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’.
See our latest analysis for DroneShield
The Last 12 Months Of Insider Transactions At DroneShield
Over the last year, we can see that the biggest insider purchase was by insider Charles Goode for AU$1.2m worth of shares, at about AU$0.26 per share. That means that an insider was happy to buy shares at above the current price of AU$0.19. It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. Charles Goode was the only individual insider to buy over the year.
You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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.
Insider Ownership
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Insiders own 24% of DroneShield shares, worth about AU$12m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About DroneShield Insiders?
The fact that there have been no DroneShield insider transactions recently certainly doesn’t bother us. But insiders have shown more of an appetite for the stock, over the last year. Insiders do have a stake in DroneShield and their transactions don’t cause us concern. Along with insider transactions, I recommend checking if DroneShield is growing revenue. This free chart of historic revenue and earnings should make that easy.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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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