Positive Signs As Multiple Insiders Buy Rainbow Rare Earths Stock

When a single insider purchases stock, it is typically not a major deal. However, when multiple insiders purchase stock, like in Rainbow Rare Earths Limited's (LON:RBW) instance, it's good news for shareholders.

While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Check out our latest analysis for Rainbow Rare Earths

Rainbow Rare Earths Insider Transactions Over The Last Year

The Non-Executive Chairman Adonis Pouroulis made the biggest insider purchase in the last 12 months. That single transaction was for UK£112k worth of shares at a price of UK£0.098 each. So it's clear an insider wanted to buy, at around the current price, which is UK£0.11. That means they have been optimistic about the company in the past, though they may have changed their mind. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. The good news for Rainbow Rare Earths share holders is that insiders were buying at near the current price.

In the last twelve months insiders purchased 1.70m shares for UK£182k. On the other hand they divested 560.02k shares, for UK£70k. In the last twelve months there was more buying than selling by Rainbow Rare Earths insiders. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

Rainbow Rare Earths 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.

Insider Ownership

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Rainbow Rare Earths insiders own about UK£16m worth of shares. That equates to 24% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At Rainbow Rare Earths Tell Us?

There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. Insiders own shares in Rainbow Rare Earths 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. Our analysis shows 5 warning signs for Rainbow Rare Earths (3 can't be ignored!) and we strongly recommend you look at these before investing.

Of course Rainbow Rare Earths 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.