Insider Stock Buying Reaches AU$2.06m On NEXTDC

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 NEXTDC Limited (ASX:NXT), 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 NEXTDC

The Last 12 Months Of Insider Transactions At NEXTDC

In the last twelve months, the biggest single purchase by an insider was when CEO, MD & Executive Director Craig Scroggie bought AU$578k worth of shares at a price of AU$10.80 per share. Even though the purchase was made at a significantly lower price than the recent price (AU$17.72), 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.

NEXTDC insiders may have bought shares in the last year, but they didn't sell any. The average buy price was around AU$12.61. We don't deny that it is nice to see insiders buying stock in the company. But we must note that the investments were made at well below today's share price. 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!

There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insiders At NEXTDC Have Bought Stock Recently

It's good to see that NEXTDC insiders have made notable investments in the company's shares. Overall, six insiders shelled out AU$871k for shares in the company -- and none sold. This could be interpreted as suggesting a positive outlook.

Insider Ownership Of NEXTDC

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 0.6% of NEXTDC shares, worth about AU$58m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

So What Do The NEXTDC Insider Transactions Indicate?

It is good to see recent purchasing. And an analysis of the transactions over the last year also gives us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Insiders likely see value in NEXTDC shares, given these transactions (along with notable insider ownership of the company). While we like knowing 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. In terms of investment risks, we've identified 2 warning signs with NEXTDC and understanding these should be part of your investment process.

Of course NEXTDC 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 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.