It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell Eumundi Group Limited (ASX:EBG), you may well want to know whether insiders have been buying or selling.

What Is Insider Selling?

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.

We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

View our latest analysis for Eumundi Group

Eumundi Group Insider Transactions Over The Last Year

The insider Steven Shoobridge made the biggest insider purchase in the last 12 months. That single transaction was for AU$101k worth of shares at a price of AU$1.03 each. That means that even when the share price was higher than AU$0.93 (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. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Steven Shoobridge was the only individual insider to buy during the last year.

You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

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).

Does Eumundi Group Boast High Insider Ownership?

Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Eumundi Group insiders own about AU$25m worth of shares (which is 64% of the company). 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 Eumundi Group Insider Transactions Indicate?

It doesn't really mean much that no insider has traded Eumundi Group shares in the last quarter. However, our analysis of transactions over the last year is heartening. Judging from their transactions, and high insider ownership, Eumundi Group 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. For example, Eumundi Group has 4 warning signs (and 2 which are a bit unpleasant) we think you should know about.

But note: Eumundi Group may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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, but not derivative transactions.

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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