Have Insiders Been Buying Petrofac Limited (LON:PFC) Shares?

It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So shareholders might well want to know whether insiders have been buying or selling shares in Petrofac Limited (LON:PFC).

Do Insider Transactions Matter?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 it is perfectly logical to keep tabs on what insiders are doing. 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'.

View our latest analysis for Petrofac

Petrofac Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by Independent Non-Executive Director George Pierson for UK£165k worth of shares, at about UK£2.10 per share. That means that an insider was happy to buy shares at above the current price of UK£1.03. 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. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

While Petrofac insiders bought shares during the last year, they didn't sell. The average buy price was around UK£1.79. This is nice to see since it implies that insiders might see value around current prices. 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!

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.

Insiders at Petrofac Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at Petrofac. In total, insiders bought UK£50k worth of shares in that time, and we didn't record any sales whatsoever. This makes one think the business has some good points.

Insider Ownership

Many investors like to check how much of a company is owned by insiders. 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 20% of Petrofac shares, worth about UK£68m. 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 Do The Petrofac Insider Transactions Indicate?

Insider purchases may have been minimal, in the last three months, but there was no selling at all. The net investment is not enough to encourage us much. But insiders have shown more of an appetite for the stock, over the last year. Insiders own shares in Petrofac and we see no evidence to suggest they are worried about the future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Petrofac. For instance, we've identified 2 warning signs for Petrofac (1 is potentially serious) you should be aware of.

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