Insider Buyers At Risecomm Group Holdings Likely Disappointed With 11% Slide

The recent 11% drop in Risecomm Group Holdings Limited's (HKG:1679) stock could come as a blow to insiders who purchased CN¥21.4m worth of stock at an average buy price of CN¥0.67 over the past 12 months. Insiders purchase with the hope of seeing their investments increase in value over time. However, due to recent losses, their initial investment is now only worth CN¥13.7m, which is not great.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

View our latest analysis for Risecomm Group Holdings

Risecomm Group Holdings Insider Transactions Over The Last Year

The insider Xiaoqin Fu made the biggest insider purchase in the last 12 months. That single transaction was for HK$11m worth of shares at a price of HK$0.57 each. That means that an insider was happy to buy shares at above the current price of HK$0.42. Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for 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.

Risecomm Group Holdings insiders may have bought shares in the last year, but they didn't sell any. Their average price was about HK$0.67. I'd consider this a positive as it suggests insiders see value at around the current price. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

Risecomm Group Holdings 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 Risecomm Group Holdings Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at Risecomm Group Holdings. Specifically, insider Xiaoqin Fu bought HK$11m worth of shares in that time, and we didn't record any sales whatsoever. This could be interpreted as suggesting a positive outlook.

Insider Ownership

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Risecomm Group Holdings insiders own 59% of the company, worth about HK$64m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Do The Risecomm Group Holdings 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. When combined with notable insider ownership, these factors suggest Risecomm Group Holdings insiders are well aligned, and quite possibly think the share price is too low. Nice! While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Case in point: We've spotted 6 warning signs for Risecomm Group Holdings you should be aware of, and 3 of them make us uncomfortable.

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 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.

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