Should You Take Comfort From Insider Transactions At Just Dial Limited (NSE:JUSTDIAL)?

It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Just Dial Limited (NSE:JUSTDIAL).

Do Insider Transactions Matter?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, such insiders must disclose their trading activities, and not trade on inside information.

Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

View our latest analysis for Just Dial

Just Dial Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Founder Venkatachalam Mani bought ₹226m worth of shares at a price of ₹606 per share. Even though the purchase was made at a significantly lower price than the recent price (₹876), 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.

Over the last year, we can see that insiders have bought 1.84m shares worth ₹838m. On the other hand they divested 322.19k shares, for ₹191m. In the last twelve months there was more buying than selling by Just Dial insiders. Their average price was about ₹454. It is certainly positive to see that insiders have invested their own money in the company. However, we do note that they were buying at significantly lower prices than today's share 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!

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

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Just Dial insiders own 37% of the company, currently worth about ₹20b based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The Just Dial Insider Transactions Indicate?

It doesn't really mean much that no insider has traded Just Dial 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, Just Dial insiders feel good about the company's future. While we like knowing 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. At Simply Wall St, we found 2 warning signs for Just Dial that deserve your attention before buying any shares.

Of course Just Dial 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, but not derivative transactions.

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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. 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.
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