Covalon Technologies Ltd.'s (CVE:COV) recent CA$7.8m market cap decline means a loss of CA$17k for insiders who bought this year

By
Simply Wall St
Published
November 15, 2021
TSXV:COV
Source: Shutterstock

Insiders who bought CA$184k worth of Covalon Technologies Ltd.'s (CVE:COV) stock at an average buy price of CA$2.43 over the last year may be disappointed by the recent 12% decrease in the stock. 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$166k.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for Covalon Technologies

The Last 12 Months Of Insider Transactions At Covalon Technologies

Over the last year, we can see that the biggest insider purchase was by Independent Chairman of the Board Amir Boloor for CA$103k worth of shares, at about CA$2.28 per share. That means that an insider was happy to buy shares at above the current price of CA$2.20. It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for shares. 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. Amir Boloor was the only individual insider to buy during the last year.

Amir Boloor bought a total of 75.60k shares over the year at an average price of CA$2.43. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

insider-trading-volume
TSXV:COV Insider Trading Volume November 16th 2021

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 39% of Covalon Technologies shares, worth about CA$23m. 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 Covalon Technologies Insiders?

The recent insider purchase is heartening. And an analysis of the transactions over the last year also gives us confidence. But we don't feel the same about the fact the company is making losses. When combined with notable insider ownership, these factors suggest Covalon Technologies insiders are well aligned, and that they may think the share price is too low. 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 3 warning signs for Covalon Technologies you should be aware of, and 1 of these is a bit concerning.

Of course Covalon Technologies 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, but not derivative transactions.

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