Scout Security Limited (ASX:SCT) insiders recover some losses but still AU$145k away from matching original investment

By
Simply Wall St
Published
March 17, 2022
ASX:SCT
Source: Shutterstock

Insiders who bought AU$298k worth of Scout Security Limited (ASX:SCT) stock in the last year recovered part of their losses as the stock rose by 11% last week. The purchase, however, has proven to be a pricey bet, with losses currently totalling AU$145k.

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.

See our latest analysis for Scout Security

Scout Security Insider Transactions Over The Last Year

In fact, the recent purchase by Martin Pretty was the biggest purchase of Scout Security shares made by an insider individual in the last twelve months, according to our records. That means that even when the share price was higher than AU$0.042 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

While Scout Security insiders bought shares during the last year, they didn't sell. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
ASX:SCT Insider Trading Volume March 17th 2022

Scout Security is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Scout Security Insiders Bought Stock Recently

It's good to see that Scout Security insiders have made notable investments in the company's shares. Not only was there no selling that we can see, but they collectively bought AU$200k worth of shares. This is a positive in our book as it implies some confidence.

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Scout Security insiders own about AU$1.9m worth of shares. That equates to 29% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

What Might The Insider Transactions At Scout Security Tell Us?

It's certainly positive to see the recent insider purchases. And an analysis of the transactions over the last year also gives us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Given that insiders also own a fair bit of Scout Security we think they are probably pretty confident of a bright 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. When we did our research, we found 6 warning signs for Scout Security (3 are potentially serious!) that we believe deserve your full attention.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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