As California Software Company Limited's market cap (NSE:CALSOFT) drops to ₹431m, insiders might be questioning their decision to buy earlier this year

By
Simply Wall St
Published
November 12, 2021
NSEI:CALSOFT
Source: Shutterstock

Insiders who acquired ₹45m worth of California Software Company Limited's (NSE:CALSOFT) stock at an average price of ₹50.56 in the past 12 months may be dismayed by the recent 14% price decline. 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 ₹25m, which is not great.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for California Software

California Software Insider Transactions Over The Last Year

The Whole-Time Director Vijayakumar Madhavan made the biggest insider purchase in the last 12 months. That single transaction was for ₹25m worth of shares at a price of ₹50.00 each. That means that even when the share price was higher than ₹27.90 (the recent price), an insider wanted to purchase shares. 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.

California Software insiders may have bought shares in the last year, but they didn't sell any. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
NSEI:CALSOFT Insider Trading Volume November 13th 2021

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 California Software

For a common shareholder, it is worth checking how many shares are held by company 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. California Software insiders own 50% of the company, currently worth about ₹218m 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 Do The California Software Insider Transactions Indicate?

There haven't been any insider transactions in the last three months -- that doesn't mean much. But insiders have shown more of an appetite for the stock, over the last year. With high insider ownership and encouraging transactions, it seems like California Software insiders think the business has merit. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing California Software. When we did our research, we found 4 warning signs for California Software (3 make us uncomfortable!) that we believe deserve your full attention.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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