Did Capricorn Metals Ltd (ASX:CMM) Insiders Buy Up More Shares?

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 shareholders might well want to know whether insiders have been buying or selling shares in Capricorn Metals Ltd (ASX:CMM).

What Is Insider Selling?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.

We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

View our latest analysis for Capricorn Metals

The Last 12 Months Of Insider Transactions At Capricorn Metals

Over the last year, we can see that the biggest insider purchase was by Executive Chairman Mark Clark for AU$144k worth of shares, at about AU$1.70 per share. That means that an insider was happy to buy shares at around the current price of AU$1.80. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. In this case we're pleased to report that the insider bought shares at close to current prices. Mark Clark was the only individual insider to buy shares in the last twelve months.

Mark Clark purchased 205.85k shares over the year. The average price per share was AU$1.69. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

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).

Does Capricorn Metals Boast High Insider Ownership?

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Capricorn Metals insiders own about AU$89m worth of shares. That equates to 14% 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 Does This Data Suggest About Capricorn Metals Insiders?

It's certainly positive to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. But we don't feel the same about the fact the company is making losses. Given that insiders also own a fair bit of Capricorn Metals we think they are probably pretty confident of a bright future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Our analysis shows 2 warning signs for Capricorn Metals (1 is potentially serious!) and we strongly recommend you look at them before investing.

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.

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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. 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.
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