Should You Take Comfort From Insider Transactions At ECP Emerging Growth Limited (ASX:ECP)?

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 before you buy or sell ECP Emerging Growth Limited (ASX:ECP), you may well want to know whether insiders have been buying or selling.

What Is Insider Selling?

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, most countries require that the company discloses such transactions to the market.

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 ECP Emerging Growth

ECP Emerging Growth Insider Transactions Over The Last Year

The insider Emmanuel Pohl made the biggest insider purchase in the last 12 months. That single transaction was for AU$288k worth of shares at a price of AU$1.00 each. Even though the purchase was made at a significantly lower price than the recent price (AU$1.50), we still think insider buying is a positive. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.

The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

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

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. It's great to see that ECP Emerging Growth insiders own 42% of the company, worth about AU$12m. 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 ECP Emerging Growth Insiders?

The fact that there have been no ECP Emerging Growth insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. With high insider ownership and encouraging transactions, it seems like ECP Emerging Growth insiders think the business has merit. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 4 warning signs for ECP Emerging Growth you should be aware of, and 1 of them can't be ignored.

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.

When trading ECP Emerging Growth or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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