Should You Take Comfort From Insider Transactions At EQT Holdings Limited (ASX:EQT)?

By
Simply Wall St
Published
May 26, 2021
ASX:EQT
Source: Shutterstock

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 we'll take a look at whether insiders have been buying or selling shares in EQT Holdings Limited (ASX:EQT).

What Is Insider Buying?

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 don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

Check out our latest analysis for EQT Holdings

The Last 12 Months Of Insider Transactions At EQT Holdings

The Independent Non-Executive Chairperson Carol Schwartz made the biggest insider purchase in the last 12 months. That single transaction was for AU$133k worth of shares at a price of AU$26.83 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$24.40). Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. 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.

EQT Holdings insiders may have bought shares in the last year, but they didn't sell any. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

insider-trading-volume
ASX:EQT Insider Trading Volume May 27th 2021

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

Insiders at EQT Holdings Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at EQT Holdings. In total, insiders bought AU$162k worth of shares in that time, and we didn't record any sales whatsoever. That shows some optimism about the company's future.

Does EQT Holdings Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 4.2% of EQT Holdings shares, worth about AU$21m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Does This Data Suggest About EQT Holdings Insiders?

It's certainly positive to see the recent insider purchases. And the longer term insider transactions also give us confidence. When combined with notable insider ownership, these factors suggest EQT Holdings insiders are well aligned, and that they may think the share price is too low. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Every company has risks, and we've spotted 1 warning sign for EQT Holdings you should know about.

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, but not derivative transactions.

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