Stock Analysis

As Challenger Exploration Limited's market cap (ASX:CEL) drops to AU$271m, insiders might be questioning their decision to buy earlier this year

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The recent price decline of 10.0% in Challenger Exploration Limited's (ASX:CEL) stock may have disappointed insiders who bought AU$26m worth of shares at an average price of AU$0.29 in the past 12 months. Insiders purchase with the hope of seeing their investments increase in value over time. However, due to recent losses, their initial investment is now only worth AU$24m, which is not great.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for Challenger Exploration

The Last 12 Months Of Insider Transactions At Challenger Exploration

Over the last year, we can see that the biggest insider purchase was by Executive Director Sergio Rotondo for AU$26m worth of shares, at about AU$0.29 per share. That means that an insider was happy to buy shares at above the current price of AU$0.27. 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 when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Sergio Rotondo was the only individual insider to buy shares in the last twelve months.

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:CEL Insider Trading Volume May 11th 2022

Challenger Exploration is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Insider Ownership

Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Challenger Exploration insiders own 23% of the company, worth about AU$62m. 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 Does This Data Suggest About Challenger Exploration Insiders?

It doesn't really mean much that no insider has traded Challenger Exploration shares in the last quarter. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in Challenger Exploration and their transactions don't cause us concern. 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. Be aware that Challenger Exploration is showing 4 warning signs in our investment analysis, and 3 of those make us uncomfortable...

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.

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