Encounter Resources Stock Down 10.0% But Insiders Still In AU$252k Profit

Encounter Resources Limited (ASX:ENR) insiders who acquired shares over the previous 12 months, can probably afford to ignore the recent 10.0% decline in the stock price. Even after accounting for the recent loss, the AU$396.0k worth of stock purchased by them is now worth AU$648.0k or in other words, their investment continues to give good returns.

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.

Check out our latest analysis for Encounter Resources

The Last 12 Months Of Insider Transactions At Encounter Resources

The Independent Non-Executive Director Philip Crutchfield made the biggest insider purchase in the last 12 months. That single transaction was for AU$396k worth of shares at a price of AU$0.22 each. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$0.36. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.

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!

Encounter Resources 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.

Insider Ownership Of Encounter Resources

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. It appears that Encounter Resources insiders own 14% of the company, worth about AU$24m. 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 Encounter Resources Insiders?

There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in Encounter Resources and their transactions don't cause us concern. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Encounter Resources. Be aware that Encounter Resources is showing 4 warning signs in our investment analysis, and 3 of those are a bit concerning...

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 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.