Stock Analysis

Shareholders might want to keep a close eye on Santos Limited (ASX:STO) after insiders sold US$2.9m stock earlier this year

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Despite a 8.9% gain in Santos Limited's (ASX:STO) stock price this week, shareholders shouldn't let up. Although prices were relatively low, insiders chose to sell US$2.9m worth of stock in the past 12 months. This could be a sign of impending weakness.

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.

However if you'd rather see where the opportunities and risks are within STO's industry, you can check out our analysis on the AU Oil and Gas industry.

The Last 12 Months Of Insider Transactions At Santos

In the last twelve months, the biggest single sale by an insider was when the MD, CEO & Director, Kevin Gallagher, sold AU$2.9m worth of shares at a price of AU$7.14 per share. That means that an insider was selling shares at slightly below the current price (AU$7.47). When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 18% of Kevin Gallagher's holding. Kevin Gallagher was the only individual insider to sell over the last year.

In the last twelve months insiders purchased 46.42k shares for AU$366k. On the other hand they divested 400.00k shares, for AU$2.9m. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

ASX:STO Insider Trading Volume October 5th 2022

I will like Santos better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Insiders At Santos Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at Santos. In total, insiders bought AU$83k worth of shares in that time, and we didn't record any sales whatsoever. This could be interpreted as suggesting a positive outlook.

Insider Ownership

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with 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 0.1% of Santos shares, worth about AU$27m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

What Might The Insider Transactions At Santos Tell Us?

It is good to see recent purchasing. But we can't say the same for the transactions over the last 12 months. We don't take much heart from transactions by Santos insiders over the last year. But they own a reasonable amount of the company, and there was some buying recently. So they seem pretty well aligned, overall. 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 3 warning signs for Santos (2 are a bit concerning!) 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.

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

Find out whether Santos 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.

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Santos Limited explores for, develops, produces, transports, and markets hydrocarbons for homes and businesses in Australia and the Asia Pacific.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Future Growth0
Past Performance4
Financial Health5

Read more about these checks in the individual report sections or in our analysis model.

Excellent balance sheet with proven track record.