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 Zotefoams plc (LON:ZTF).
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 logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
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Zotefoams Insider Transactions Over The Last Year
The Group CEO, David Stirling, made the biggest insider sale in the last 12 months. That single transaction was for UK£188k worth of shares at a price of UK£5.74 each. That means that even when the share price was below the current price of UK£6.50, an insider wanted to cash in some shares. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it’s only a weak signal. This single sale was just 6.7% of David Stirling’s stake.
In the last twelve months insiders netted UK£298k for 51999 shares sold. Zotefoams insiders didn’t buy any shares over the last year. You can see a visual depiction of insider transactions (by 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!
I will like Zotefoams better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Zotefoams Insiders Are Selling The Stock
Over the last three months, we’ve seen significant insider selling at Zotefoams. Specifically, insiders ditched UK£298k worth of shares in that time, and we didn’t record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Insider Ownership of Zotefoams
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that Zotefoams insiders own 4.9% of the company, worth about UK£15m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About Zotefoams Insiders?
Insiders sold stock recently, but they haven’t been buying. And there weren’t any purchases to give us comfort, over the last year. But since Zotefoams is profitable and growing, we’re not too worried by this. While insiders do own shares, they don’t own a heap, and they have been selling. So we’d only buy after careful consideration. Of course, the future is what matters most. So if you are interested in Zotefoams, you should check out this free report on analyst forecasts for the company.
But note: Zotefoams may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.