It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So we’ll take a look at whether insiders have been buying or selling shares in Peyto Exploration & Development Corp. (TSE:PEY).
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 in the company. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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’.
The Last 12 Months Of Insider Transactions At Peyto Exploration & Development
In the last twelve months, the biggest single purchase by an insider was when insider Scott Robinson bought CA$575k worth of shares at a price of CA$11.50 per share. That means that even when the share price was higher than CA$3.21 (the recent price), 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. We always take careful note of the price insiders pay when purchasing 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 CA$1.1m for 126k shares. On the other hand they divested 260k shares, for CA$2.1m. All up, insiders sold more shares in Peyto Exploration & Development than they bought, over the last year. The sellers received a price of around CA$8.12, on average. Insider selling doesn’t make us excited to buy. However, we do note that the average sale price was significantly higher than the current share price (which is CA$3.21). You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
Insiders at Peyto Exploration & Development Have Sold Stock Recently
We’ve seen more insider selling than insider buying at Peyto Exploration & Development recently. We note insiders cashed in CA$302k worth of shares. On the flip side, insiders spent CA$169k on purchasing shares. The share price has moved a bit recently, but it’s hard to argue that the selling is a positive.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Peyto Exploration & Development insiders own about CA$14m worth of shares. That equates to 2.6% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Peyto Exploration & Development Tell Us?
The insider sales have outweighed the insider buying, at Peyto Exploration & Development, in the last three months. And our longer term analysis of insider transactions didn’t bring confidence, either. But since Peyto Exploration & Development is profitable and growing, we’re not too worried by this. Insiders own shares, but we’re still pretty cautious, given the history of sales. We’re in no rush to buy! Of course, the future is what matters most. So if you are interested in Peyto Exploration & Development, you should check out this free report on analyst forecasts for the company.
But note: Peyto Exploration & Development may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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, but not derivative transactions.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.