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We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Analytica Limited (ASX:ALT), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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’.
The Last 12 Months Of Insider Transactions At Analytica
In the last twelve months, the biggest single purchase by an insider was when Executive Chairman Michael Monsour bought AU$514k worth of shares at a price of AU$0.005 per share. That means that even when the share price was higher than AU$0.004 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. 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.
In the last twelve months insiders paid AU$591k for 118.0m shares purchased. While Analytica insiders bought shares last year, they didn’t sell. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
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 Analytica Have Bought Stock Recently
Over the last quarter, Analytica insiders have spent a meaningful amount on shares. In total, insiders bought AU$591k worth of shares in that time, and we didn’t record any sales whatsoever. This is a positive in our book as it implies some confidence.
Does Analytica 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. Analytica insiders own about AU$5.2m worth of shares. That equates to 37% of the company. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Analytica Insider Transactions Indicate?
It’s certainly positive to see the recent insider purchases. And an analysis of the transactions over the last year also gives us confidence. 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 Analytica we think they are probably pretty confident of a bright future. I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
But note: Analytica 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 aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.