Insiders who acquired US$165k worth of LawFinance Limited's (ASX:LAW) stock at an average price of US$0.28 in the past 12 months may be dismayed by the recent 18% price decline. Insiders invest with the hopes of seeing their money grow in value over time. However, as a result of recent losses, their initial investment is now only worth US$121k, which is not what they expected.
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.
The Last 12 Months Of Insider Transactions At LawFinance
Notably, that recent purchase by Daniel Kleijn is the biggest insider purchase of LawFinance shares that we've seen in the last year. That means that an insider was happy to buy shares at above the current price of AU$0.20. 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. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
While LawFinance insiders bought shares during the last year, they didn't sell. 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Insiders at LawFinance Have Bought Stock Recently
Over the last quarter, LawFinance insiders have spent a meaningful amount on shares. In total, insiders bought AU$161k worth of shares in that time, and we didn't record any sales whatsoever. This makes one think the business has some good points.
Does LawFinance Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. LawFinance insiders own about AU$1.5m worth of shares. That equates to 15% 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.
So What Do The LawFinance Insider Transactions Indicate?
It is good to see recent purchasing. And the longer term insider transactions also give us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. When combined with notable insider ownership, these factors suggest LawFinance insiders are well aligned, and that they may think the share price is too low. 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. To help with this, we've discovered 6 warning signs (5 shouldn't be ignored!) that you ought to be aware of before buying any shares in LawFinance.
But note: LawFinance 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.
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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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.