Bullish Petra Diamonds Insider Buying Worth US$1.53m Yet To Pay Off

Insiders who acquired US$1.53m worth of Petra Diamonds Limited's (LON:PDL) stock at an average price of US$0.27 in the past 12 months may be dismayed by the recent 12% price decline. Insiders buy with the expectation to see their investments rise in value over a period of time. However, recent losses have rendered their above investment worth US$1.24m which is not ideal.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

We've discovered 2 warning signs about Petra Diamonds. View them for free.

Petra Diamonds Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by Non-Executive Chair Jose Vargas Gomez for UK£1.1m worth of shares, at about UK£0.27 per share. That means that even when the share price was higher than UK£0.22 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing shares. 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.

In the last twelve months Petra Diamonds insiders were buying shares, but not selling. 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!

Check out our latest analysis for Petra Diamonds

Petra Diamonds is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.

Insiders At Petra Diamonds Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at Petra Diamonds. Specifically, Non-Executive Chair Jose Vargas Gomez bought UK£89k 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

For a common shareholder, it is worth checking how many shares are held by company 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. From our data, it seems that Petra Diamonds insiders own 12% of the company, worth about UK£5.3m. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!

So What Do The Petra Diamonds Insider Transactions Indicate?

The recent insider purchase is heartening. We also take confidence from the longer term picture of insider transactions. But on the other hand, the company made a loss during the last year, which makes us a little cautious. While the overall levels of insider ownership are below what we'd like to see, the history of transactions imply that Petra Diamonds insiders are reasonably well aligned, and optimistic for the future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Petra Diamonds. For example - Petra Diamonds has 2 warning signs we think you should be aware of.

Of course Petra Diamonds 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 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.