Selling AU$2.5m Of Stock Was Lucrative Decision For Frontier Energy Insiders

While it’s been a great week for Frontier Energy Limited (ASX:FHE) shareholders after stock gained 43%, they should consider it with a grain of salt. Even though stock prices were relatively low, insiders elected to sell AU$2.5m worth of stock in the last year, which could indicate some expected downturn.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

The Last 12 Months Of Insider Transactions At Frontier Energy

Over the last year, we can see that the biggest insider sale was by the insider, Brian Flannery, for AU$2.3m worth of shares, at about AU$0.10 per share. That means that an insider was selling shares at slightly below the current price (AU$0.14). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. 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 100% of Brian Flannery's holding.

All up, insiders sold more shares in Frontier Energy than they bought, over the last year. The sellers received a price of around AU$0.10, on average. It's not particularly great to see insiders were selling shares at below recent prices. Since insiders sell for many reasons, we wouldn't put too much weight on it. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

Check out our latest analysis for Frontier Energy

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

Does Frontier Energy Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Frontier Energy insiders own 28% of the company, worth about AU$22m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Does This Data Suggest About Frontier Energy Insiders?

There haven't been any insider transactions in the last three months -- that doesn't mean much. Still, the insider transactions at Frontier Energy in the last 12 months are not very heartening. But we do like the fact that insiders own a fair chunk of the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To help with this, we've discovered 6 warning signs (3 make us uncomfortable!) that you ought to be aware of before buying any shares in Frontier Energy.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.

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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.