Insiders Who Sold AU$2.0m Of Environmental Group Made The Right Call

While The Environmental Group Limited (ASX:EGL) shareholders have had a good week with the stock up 13%, they shouldn't let their guards down. Although prices were relatively low, insiders chose to sell AU$2.0m worth of stock in the past 12 months. This could be a sign of impending weakness.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for Environmental Group

The Last 12 Months Of Insider Transactions At Environmental Group

The insider, Ellis Richardson, made the biggest insider sale in the last 12 months. That single transaction was for AU$2.0m worth of shares at a price of AU$0.23 each. That means that even when the share price was below the current price of AU$0.34, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 19% of Ellis Richardson's stake. Ellis Richardson was the only individual insider to sell over the last year.

You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

If you are like me, then you will not want to miss this free list of small cap stocks that are not only being bought by insiders but also have attractive valuations.

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. We usually like to see fairly high levels of insider ownership. Environmental Group insiders own about AU$33m worth of shares. That equates to 26% 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 Environmental Group Insiders?

There haven't been any insider transactions in the last three months -- that doesn't mean much. Still, the insider transactions at Environmental Group in the last 12 months are not very heartening. But we do like the fact that insiders own a fair chunk of the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To assist with this, we've discovered 1 warning sign that you should run your eye over to get a better picture of Environmental Group.

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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com