We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell IncentiaPay Limited (ASX:INP), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.
The Last 12 Months Of Insider Transactions At IncentiaPay
Over the last year, we can see that the biggest insider purchase was by Non-Executive Director Dean Palmer for AU$418k worth of shares, at about AU$0.011 per share. Even though the purchase was made at a significantly lower price than the recent price (AU$0.032), we still think insider buying is a positive. 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.
The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Does IncentiaPay Boast High 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. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 15% of IncentiaPay shares, worth about AU$4.3m, according to our data. However, it's possible that insiders might have an indirect interest through a more complex structure. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!
So What Does This Data Suggest About IncentiaPay Insiders?
The fact that there have been no IncentiaPay insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. The transactions are fine but it'd be more encouraging if IncentiaPay insiders bought more shares in the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing IncentiaPay. For instance, we've identified 5 warning signs for IncentiaPay (3 are a bit unpleasant) you should be aware of.
But note: IncentiaPay 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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This article by Simply Wall St is general in nature. 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.
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