Possible Turnaround For Earths Energy Insiders, Still Down AU$204k

Some of the losses seen by insiders who purchased AU$853.3k worth of Earths Energy Limited (ASX:EE1) shares over the past year were recovered after the stock increased by 18% over the past week. The purchase, however, has proven to be a pricey bet, with losses currently totalling AU$204k.

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.

View our latest analysis for Earths Energy

Earths Energy Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by insider Jason Peterson for AU$250k worth of shares, at about AU$0.02 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.013). Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for 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 Earths Energy insiders were buying shares, but not selling. The average buy price was around AU$0.017. These transactions suggest that insiders have considered the current price attractive. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

Earths Energy 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.

Insiders At Earths Energy Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at Earths Energy. In total, insiders bought AU$226k worth of shares in that time, and we didn't record any sales whatsoever. This makes one think the business has some good points.

Does Earths Energy Boast High 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. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Earths Energy insiders own 40% of the company, worth about AU$3.9m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The Earths Energy Insider Transactions Indicate?

The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. But on the other hand, the company made a loss during the last year, which makes us a little cautious. Along with the high insider ownership, this analysis suggests that insiders are quite bullish about Earths Energy. Nice! While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. For example - Earths Energy has 4 warning signs we think you should be aware of.

Of course Earths Energy may not be the best stock to buy. So you may wish to see this free collection of high quality 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.

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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.