Stock Analysis

Insiders might want to re-evaluate their AU$3.1m stock purchase as Eagle Mountain Mining Limited (ASX:EM2) drops to AU$52m

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Insiders who bought AU$3.1m worth of Eagle Mountain Mining Limited's (ASX:EM2) stock at an average buy price of AU$0.21 over the last year may be disappointed by the recent 13% decrease in the stock. Insiders buy with the expectation to see their investments rise in value over a period of time. However, recent losses have rendered their above investment worth AU$2.5m which is not ideal.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

Check out our latest analysis for Eagle Mountain Mining

Eagle Mountain Mining Insider Transactions Over The Last Year

The MD & Executive Director Charles Bass made the biggest insider purchase in the last 12 months. That single transaction was for AU$2.0m worth of shares at a price of AU$0.16 each. That means that an insider was happy to buy shares at around the current price of AU$0.17. 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. The good news for Eagle Mountain Mining share holders is that an insider was buying at near the current price. The only individual insider to buy over the last year was Charles Bass.

Charles Bass bought a total of 14.67m shares over the year at an average price of AU$0.21. 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!

ASX:EM2 Insider Trading Volume March 16th 2023

Eagle Mountain Mining is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insider Ownership Of Eagle Mountain Mining

For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Eagle Mountain Mining insiders own 35% of the company, worth about AU$18m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

So What Does This Data Suggest About Eagle Mountain Mining Insiders?

It's certainly positive to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. But we don't feel the same about the fact the company is making losses. When combined with notable insider ownership, these factors suggest Eagle Mountain Mining insiders are well aligned, and that they may think the share price is too low. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example, Eagle Mountain Mining has 6 warning signs (and 2 which make us uncomfortable) we think you should know about.

But note: Eagle Mountain Mining 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 currently account for open market transactions and private dispositions, but not derivative transactions.

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