We often see insiders buying up shares in companies that perform well over the long term. 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 Extendicare Inc. (TSE:EXE).
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, 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 it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.
Extendicare Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Senior VP & CFO David Bacon bought CA$193k worth of shares at a price of CA$8.10 per share. That means that an insider was happy to buy shares at above the current price of CA$7.86. 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. To us, it’s very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
Extendicare insiders may have bought shares in the last year, but they didn’t sell any. 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 Extendicare Have Bought Stock Recently
Over the last three months, we’ve seen significant insider buying at Extendicare. Not only was there no selling that we can see, but they collectively bought CA$106k worth of shares. That shows some optimism about the company’s future.
Does Extendicare Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. From what we can see in our data, insiders own only about CA$1.3m worth of Extendicare shares. We might be missing something but that seems like very low insider ownership.
So What Do The Extendicare Insider Transactions Indicate?
The recent insider purchases are heartening. And the longer term insider transactions also give us confidence. While the overall levels of insider ownership are below what we’d like to see, the history of transactions imply that Extendicare insiders are reasonably well aligned, and optimistic for the future. So while it’s helpful to know what insiders are doing in terms of buying or selling, it’s also helpful to know the risks that a particular company is facing. In terms of investment risks, we’ve identified 3 warning signs with Extendicare and understanding them should be part of your investment process.
Of course Extendicare 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.
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