Should You Take Comfort From Insider Transactions At DATA Communications Management Corp. (TSE:DCM)?

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 shareholders might well want to know whether insiders have been buying or selling shares in DATA Communications Management Corp. (TSE:DCM).

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 on the market. However, such insiders must disclose their trading activities, and not trade on inside information.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.

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The Last 12 Months Of Insider Transactions At DATA Communications Management

Over the last year, we can see that the biggest insider purchase was by Senior VP & Chief Commercial Officer Michael Coté for CA$177k worth of shares, at about CA$1.42 per share. That means that even when the share price was higher, an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. It’s not at all bad to see insiders buy shares at or above current prices.

In the last twelve months insiders purchased 330.75k shares for CA$453k. On the other hand they divested 1.97k shares, for CA$3.5k. In total, DATA Communications Management insiders bought more than they sold over the last year. They paid about CA$1.37 on average. I’d consider this a positive as it suggests insiders see value at around the current price, which is CA$1.18. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

TSX:DCM Insider Trading January 17th 19
TSX:DCM Insider Trading January 17th 19

DATA Communications Management is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insiders at DATA Communications Management Have Bought Stock Recently

It’s good to see that DATA Communications Management insiders have made notable investments in the company’s shares. Overall, 3 insiders shelled out CA$132k for shares in the company — and none sold. This could be interpreted as suggesting a positive outlook.

Does DATA Communications Management 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. We usually like to see fairly high levels of insider ownership. It appears that DATA Communications Management insiders own 22% of the company, worth about CA$6.0m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Does This Data Suggest About DATA Communications Management Insiders?

It’s certainly positive to see the recent insider purchases. We also take confidence from the longer term picture of insider transactions. However, we note that the company didn’t make a profit over the last twelve months, which makes us cautious. Given that insiders also own a fair bit of DATA Communications Management we think they are probably pretty confident of a bright future. Along with insider transactions, I recommend checking if DATA Communications Management is growing revenue. This free chart of historic revenue and earnings should make that easy.

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

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.