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 Mitchell Services Limited (ASX:MSV).
What Is Insider Buying?
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, such insiders must disclose their trading activities, and not trade on inside information.
We don’t think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise’.
Check out our latest analysis for Mitchell Services
Mitchell Services Insider Transactions Over The Last Year
The Executive Chairman Nathan Mitchell made the biggest insider purchase in the last 12 months. That single transaction was for AU$190k worth of shares at a price of AU$0.60 each. That means that an insider was happy to buy shares at around the current price of AU$0.61. Of course they may have changed their mind. But this suggests they are optimistic. If someone buys shares at well below current prices, it’s a good sign on balance, but keep in mind they may no longer see value. In this case we’re pleased to report that the insider bought shares at close to current prices. Nathan Mitchell was the only individual insider to buy during the last year. We note that Nathan Mitchell was both the biggest buyer and the biggest seller.
Nathan Mitchell bought 670.30k shares over the last 12 months at an average price of AU$0.54. 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!
Mitchell Services is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Does Mitchell Services Boast High Insider Ownership?
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. I reckon it’s a good sign if insiders own a significant number of shares in the company. Insiders own 27% of Mitchell Services shares, worth about AU$33m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Does This Data Suggest About Mitchell Services Insiders?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in Mitchell Services and we see no evidence to suggest they are worried about the future. In addition to knowing about insider transactions going on, it’s beneficial to identify the risks facing Mitchell Services. At Simply Wall St, we found 3 warning signs for Mitchell Services that deserve your attention before buying any shares.
But note: Mitchell Services 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.
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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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