Favourable Signals For Norwood Systems: Numerous Insiders Acquired Stock

Usually, when one insider buys stock, it might not be a monumental event. But when multiple insiders are buying like they did in the case of Norwood Systems Limited (ASX:NOR), that sends out a positive message to the company's shareholders.

While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for Norwood Systems

The Last 12 Months Of Insider Transactions At Norwood Systems

Over the last year, we can see that the biggest insider purchase was by Non-Executive Director John Tarrant for AU$100k worth of shares, at about AU$0.04 per share. That means that an insider was happy to buy shares at above the current price of AU$0.036. It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

Happily, we note that in the last year insiders paid AU$317k for 8.04m shares. But insiders sold 2.00m shares worth AU$76k. In the last twelve months there was more buying than selling by Norwood Systems insiders. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

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.

Insider Ownership

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Norwood Systems insiders own about AU$7.7m worth of shares (which is 45% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Do The Norwood Systems Insider Transactions Indicate?

It doesn't really mean much that no insider has traded Norwood Systems shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. With high insider ownership and encouraging transactions, it seems like Norwood Systems insiders think the business has merit. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. When we did our research, we found 4 warning signs for Norwood Systems (2 shouldn't be ignored!) that we believe deserve your full attention.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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 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.