Megastar Foods Slides As Insider Purchases Lose Another ₹5.6m

The recent 10% drop in Megastar Foods Limited's (NSE:MEGASTAR) stock could come as a blow to insiders who purchased ₹32.6m worth of stock at an average buy price of ₹326 over the past 12 months. This is not good as insiders invest based on expectations that their money will appreciate over time. However, as a result of recent losses, their original investment is now worth only ₹27.0m.

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 Megastar Foods

Megastar Foods Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Chairman & MD Vikas Goel bought ₹20m worth of shares at a price of ₹326 per share. That means that an insider was happy to buy shares at above the current price of ₹270. 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. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

While Megastar Foods insiders bought shares during the last year, they didn't sell. 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!

Megastar Foods is not the only stock insiders are buying. So take a peek at this free list of under-the-radar companies with insider buying.

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Megastar Foods insiders own 71% of the company, currently worth about ₹2.2b based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Does This Data Suggest About Megastar Foods Insiders?

There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. It would be great to see more insider buying, but overall it seems like Megastar Foods insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. Every company has risks, and we've spotted 5 warning signs for Megastar Foods (of which 1 doesn't sit too well with us!) you should know about.

Of course Megastar Foods 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.