Middle Island Resources Insider Confidence Rewarded, Stock Hits AU$5.8m Market Cap

Middle Island Resources Limited (ASX:MDI) insiders who bought shares over the past year were rewarded handsomely last week. The stock rose 17%, resulting in a AU$827k rise in the company's market capitalisation, translating to a gain of 40% on their initial investment. As a result, their original purchase of AU$571.8k worth of stock is now worth AU$798.0k.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

We've discovered 4 warning signs about Middle Island Resources. View them for free.

The Last 12 Months Of Insider Transactions At Middle Island Resources

Over the last year, we can see that the biggest insider purchase was by Director Daniel Raihani for AU$226k worth of shares, at about AU$0.015 per share. Even though the purchase was made at a significantly lower price than the recent price (AU$0.021), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.

In the last twelve months Middle Island Resources insiders were buying shares, but not selling. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

See our latest analysis for Middle Island Resources

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

Middle Island Resources Insiders Bought Stock Recently

Over the last quarter, Middle Island Resources insiders have spent a meaningful amount on shares. Specifically, Director Daniel Raihani bought AU$163k worth of shares in that time, and we didn't record any sales whatsoever. This could be interpreted as suggesting a positive outlook.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Middle Island Resources insiders own 42% of the company, currently worth about AU$2.4m based on the recent share price. 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 Middle Island Resources Insider Transactions Indicate?

The recent insider purchase is heartening. 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. When combined with notable insider ownership, these factors suggest Middle Island Resources insiders are well aligned, and quite possibly think the share price is too low. That's what I like to see! 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. When we did our research, we found 4 warning signs for Middle Island Resources (2 make us uncomfortable!) that we believe deserve your full attention.

But note: Middle Island 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.