With TerraCom Up 16%, Insider Buyers Count Their Returns

Last week, TerraCom Limited (ASX:TER) insiders, who had purchased shares in the previous 12 months were rewarded handsomely. The shares increased by 16% last week, resulting in a AU$11m increase in the company's market worth, implying a 55% gain on their initial purchase. As a result, the stock they originally bought for AU$210.0k is now worth AU$324.8k.

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.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

The Last 12 Months Of Insider Transactions At TerraCom

In the last twelve months, the biggest single purchase by an insider was when Non-Executive Chairman Mark Lochtenberg bought AU$210k worth of shares at a price of AU$0.064 per share. Even though the purchase was made at a significantly lower price than the recent price (AU$0.099), 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.

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!

Check out our latest analysis for TerraCom

TerraCom is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.

Does TerraCom Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 11% of TerraCom shares, worth about AU$8.6m, according to our data. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Whilst better than nothing, we're not overly impressed by these holdings.

So What Do The TerraCom Insider Transactions Indicate?

There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. While we have no worries about the insider transactions, we'd be more comfortable if they owned more TerraCom stock. 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 assist with this, we've discovered 1 warning sign that you should run your eye over to get a better picture of TerraCom.

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 of direct interests only, but not derivative transactions or indirect interests.

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

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.