Despite Magmatic Resources' Pullback, Insiders Still Gained AU$79k

Insiders who purchased Magmatic Resources Limited (ASX:MAG) shares in the past 12 months are unlikely to be deeply impacted by the stock's 14% decline over the past week. After taking the recent loss into consideration, the AU$329.4k worth of stock they bought is now worth AU$408.5k, indicating that their investment yielded a positive return.

Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.

View our latest analysis for Magmatic Resources

Magmatic Resources Insider Transactions Over The Last Year

The insider Yiu Ming made the biggest insider purchase in the last 12 months. That single transaction was for AU$272k worth of shares at a price of AU$0.13 each. That means that even when the share price was higher than AU$0.095 (the recent price), an insider wanted to purchase shares. 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. In our view, the price an insider pays for shares is very important. 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. We note that Yiu Ming was both the biggest buyer and the biggest seller.

Happily, we note that in the last year insiders paid AU$329k for 4.30m shares. But they sold 500.00k shares for AU$45k. In total, Magmatic Resources insiders bought more than they sold over the last year. They paid about AU$0.077 on average. We don't deny that it is nice to see insiders buying stock in the company. However, you should keep in mind that they bought when the share price was meaningfully below today's levels. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

Magmatic Resources 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.

Magmatic Resources Insiders Bought Stock Recently

Over the last three months, we've seen significantly more insider buying, than insider selling, at Magmatic Resources. In total, two insiders bought AU$322k worth of shares in that time. On the other hand, insider Yiu Ming netted AU$45k by selling. We think insiders may be optimistic about the future, since insiders have been net buyers of shares.

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. Insiders own 33% of Magmatic Resources shares, worth about AU$12m. 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 Do The Magmatic Resources Insider Transactions Indicate?

It is good to see recent purchasing. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. Insiders likely see value in Magmatic Resources shares, given these transactions (along with notable insider ownership of the company). 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. For example, Magmatic Resources has 5 warning signs (and 3 which can't be ignored) we think you should know about.

But note: Magmatic Resources 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 of direct interests only, but not derivative transactions or indirect interests.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.