Stock Analysis

As Cauldron Energy Limited (ASX:CXU) gains 14%, insiders who bought last year may be wishing they had bet higher

Source: Shutterstock

Cauldron Energy Limited (ASX:CXU) insiders who bought shares over the past year were rewarded handsomely last week. The stock rose 14%, resulting in a AU$932k rise in the company's market capitalisation. As a result, the stock they originally bought for AU$344k is now worth AU$383k.

While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for Cauldron Energy

Cauldron Energy Insider Transactions Over The Last Year

The insider Mark Bahen made the biggest insider purchase in the last 12 months. That single transaction was for AU$328k worth of shares at a price of AU$0.007 each. Even though the purchase was made at a significantly lower price than the recent price (AU$0.008), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.

Cauldron Energy 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!

ASX:CXU Insider Trading Volume February 8th 2023

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insiders At Cauldron Energy Have Bought Stock Recently

Over the last quarter, Cauldron Energy insiders have spent a meaningful amount on shares. We can see that insider Mark Bahen paid AU$328k for shares in the company. No-one sold. This makes one think the business has some good points.

Does Cauldron Energy Boast High Insider Ownership?

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Cauldron Energy insiders own 25% of the company, worth about AU$1.8m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At Cauldron Energy Tell Us?

It is good to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. 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 Cauldron Energy we think they are probably pretty confident of a bright future. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. In terms of investment risks, we've identified 4 warning signs with Cauldron Energy and understanding these should be part of your investment process.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Cauldron Energy is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis