Read This Before Buying Ariadne Australia Limited (ASX:ARA) Shares

We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell Ariadne Australia Limited (ASX:ARA), you may well want to know whether insiders have been buying or selling.

What Is Insider Selling?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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.’

View our latest analysis for Ariadne Australia

The Last 12 Months Of Insider Transactions At Ariadne Australia

Executive Director Gary Weiss made the biggest insider sale in the last 12 months. That single transaction was for AU$7.0m worth of shares at a price of AU$0.70 each. So we know that an insider sold shares at around the present share price of AU$0.67. They could have a variety of motivations for selling, but it’s still not particularly encouraging to see. Arguably, insider selling at around current prices should give us reason to reflect on whether the stock is fully valued at the moment. Gary Weiss was the only individual insider to sell over the last year.

Over the last year, we can see that insiders have bought 6.00m shares worth AU$4.2m. On the other hand they divested 11.90m shares, for AU$8.3m. Gary Weiss divested 11.90m shares over the last 12 months at an average price of AU$0.70. You can see a visual depiction of insider transactions over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

ASX:ARA Insider Trading January 3rd 19
ASX:ARA Insider Trading January 3rd 19

I will like Ariadne Australia better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Insiders at Ariadne Australia Have Sold Stock Recently

There was substantially more insider selling, than buying, of Ariadne Australia shares over the last three months. In that time, Gary Weiss dumped AU$8.3m worth of shares. On the flip side, insiders spent AU$4.2m on purchasing shares (as mentioned above). Since the selling really does outweigh the buying, we’d say that these transactions may suggest that some insiders feel the shares are not cheap.

Does Ariadne Australia 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. Ariadne Australia insiders own about AU$80m worth of shares (which is 62% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Does This Data Suggest About Ariadne Australia Insiders?

The stark truth for Ariadne Australia is that there has been more insider selling than insider buying in the last three months. And our longer term analysis of insider transactions didn’t bring confidence, either. But since Ariadne Australia is profitable and growing, we’re not too worried by this. The company boasts high insider ownership, but we’re a little hesitant, given the history of share sales. I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

But note: Ariadne Australia 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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.