We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Pharos Energy plc (LON:PHAR).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Pharos Energy Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when CEO, President & Executive Director Edward Story bought UK£294k worth of shares at a price of UK£0.19 per share. That implies that an insider found the current price of UK£0.23 per share to be enticing. Of course they may have changed their mind. But this suggests they are optimistic. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. Happily, the Pharos Energy insiders decided to buy shares at close to current prices.
Pharos Energy insiders may have bought shares in the last year, but they didn't sell any. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Pharos Energy is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at Pharos Energy Have Bought Stock Recently
Over the last three months, we've seen significant insider buying at Pharos Energy. Overall, three insiders shelled out UK£349k for shares in the company -- and none sold. This is a positive in our book as it implies some confidence.
Insider Ownership of Pharos Energy
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Pharos Energy insiders own about UK£23m worth of shares. That equates to 24% 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 Pharos Energy Tell Us?
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. Insiders likely see value in Pharos Energy shares, given these transactions (along with notable insider ownership of the company). So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. At Simply Wall St, we found 3 warning signs for Pharos Energy that deserve your attention before buying any shares.
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, but not derivative transactions.
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