Insiders of Hongcheng Environmental Technology Getting Good Value On Their CN¥8.04m Investment

Hongcheng Environmental Technology Company Limited (HKG:2265) insiders who bought shares over the past year were rewarded handsomely last week. The stock rose 10.0%, resulting in a HK$70m rise in the company's market capitalisation, translating to a gain of 15% on their initial investment. In other words, the original CN¥8.04m purchase is now worth CN¥9.24m.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

See our latest analysis for Hongcheng Environmental Technology

The Last 12 Months Of Insider Transactions At Hongcheng Environmental Technology

Over the last year, we can see that the biggest insider purchase was by Chairman Zeming Liu for HK$4.1m worth of shares, at about HK$0.69 per share. Even though the purchase was made at a significantly lower price than the recent price (HK$0.77), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.

Zeming Liu bought 12.00m shares over the last 12 months at an average price of HK$0.67. 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!

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insider Ownership Of Hongcheng Environmental Technology

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. It's great to see that Hongcheng Environmental Technology insiders own 60% of the company, worth about HK$460m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

What Might The Insider Transactions At Hongcheng Environmental Technology Tell Us?

It doesn't really mean much that no insider has traded Hongcheng Environmental Technology shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. Judging from their transactions, and high insider ownership, Hongcheng Environmental Technology insiders feel good about the company's 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. To help with this, we've discovered 2 warning signs (1 is potentially serious!) that you ought to be aware of before buying any shares in Hongcheng Environmental Technology.

But note: Hongcheng Environmental Technology 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.

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.