Despite low prices, Energy One Limited (ASX:EOL) insiders sold AU$2.9m worth of shares last year probably anticipating weakness

By
Simply Wall St
Published
September 13, 2021
ASX:EOL
Source: Shutterstock

Despite the fact that Energy One Limited's (ASX:EOL) value has dropped 11% in the last week insiders who sold AU$2.9m worth of stock in the past 12 months have had less success. Given that the average selling price of AU$4.03 is still lower than the current share price, insiders would probably have been better off keeping their shares.

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.

View our latest analysis for Energy One

Energy One Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the Non-Independent Director, Ian Ferrier, sold AU$2.0m worth of shares at a price of AU$4.00 per share. That means that even when the share price was below the current price of AU$5.85, an insider wanted to cash in some shares. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 6.8% of Ian Ferrier's holding.

In the last year Energy One insiders didn't buy any company stock. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

insider-trading-volume
ASX:EOL Insider Trading Volume September 13th 2021

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).

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. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Energy One insiders own 58% of the company, worth about AU$97m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Do The Energy One Insider Transactions Indicate?

The fact that there have been no Energy One insider transactions recently certainly doesn't bother us. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of Energy One insider transactions don't fill us with confidence. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that Energy One has 1 warning sign and it would be unwise to ignore this.

Of course Energy One may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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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