Bullish New Found Gold Insider Buying Worth CA$8.92m Yet To Pay Off

Insiders who acquired CA$8.92m worth of New Found Gold Corp.'s (CVE:NFG) stock at an average price of CA$5.51 in the past 12 months may be dismayed by the recent 14% price decline. This is not good as insiders invest based on expectations that their money will appreciate over time. However, as a result of recent losses, their original investment is now worth only CA$5.32m.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

Check out our latest analysis for New Found Gold

New Found Gold Insider Transactions Over The Last Year

The insider Eric Sprott made the biggest insider purchase in the last 12 months. That single transaction was for CA$5.0m worth of shares at a price of CA$5.27 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being CA$3.28). It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Eric Sprott was the only individual insider to buy shares in the last twelve months.

Eric Sprott purchased 1.62m shares over the year. The average price per share was CA$5.51. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

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).

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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 10% of New Found Gold shares, worth about CA$67m. 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 New Found Gold Tell Us?

It doesn't really mean much that no insider has traded New Found Gold shares in the last quarter. However, our analysis of transactions over the last year is heartening. Insiders own shares in New Found Gold and we see no evidence to suggest they are worried about the future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 4 warning signs for New Found Gold you should be aware of, and 1 of them can't be ignored.

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.