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Generally, when a single insider buys stock, it is usually not a big deal. However, when several insiders are buying, like in the case of EARNZ plc (LON:EARN), it sends a favourable message to the company’s shareholders.
While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.
View our latest analysis for EARNZ
In the last twelve months, the biggest single purchase by an insider was when Executive Chairman Robert Holt bought UK£360k worth of shares at a price of UK£0.075 per share. That means that even when the share price was higher than UK£0.056 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. To us, it’s very important to consider the price insiders pay for shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels. Notably Robert Holt was also the biggest seller.
Happily, we note that in the last year insiders paid UK£496k for 6.68m shares. But they sold 800.00k shares for UK£65k. In total, EARNZ insiders bought more than they sold over the last year. 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!
EARNZ is not the only stock insiders are buying. So take a peek at this free list of under-the-radar companies with insider buying.
There has been significantly more insider buying, than selling, at EARNZ, over the last three months. In total, two insiders bought UK£71k worth of shares in that time. But Executive Chairman Robert Holt sold shares worth UK£9.8k. We think insiders may be optimistic about the future, since insiders have been net buyers of shares.
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. It appears that EARNZ insiders own 19% of the company, worth about UK£1.1m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
The recent insider purchases are heartening. And the longer term insider transactions also give us confidence. But on the other hand, the company made a loss during the last year, which makes us a little cautious. Insiders likely see value in EARNZ shares, given these transactions (along with notable insider ownership of the company). 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. You’d be interested to know, that we found 3 warning signs for EARNZ and we suggest you have a look.