Should You Take Comfort From Insider Transactions At De La Rue plc (LON:DLAR)?
We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in De La Rue plc (LON:DLAR).
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, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
Check out our latest analysis for De La Rue
De La Rue Insider Transactions Over The Last Year
In fact, the recent purchase by Kevin Loosemore was the biggest purchase of De La Rue shares made by an insider individual in the last twelve months, according to our records. So it's clear an insider wanted to buy, at around the current price, which is UK£1.26. That means they have been optimistic about the company in the past, though they may have changed their mind. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. In this case we're pleased to report that the insider purchases were made at close to current prices.
Happily, we note that in the last year insiders paid UK£1.4m for 1.21m shares. But insiders sold 5077 shares worth UK£6.8k. Overall, De La Rue insiders were net buyers during the last year. The chart below shows insider transactions (by 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!
De La Rue is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
De La Rue Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at De La Rue. In total, insiders bought UK£1.2m worth of shares in that time, and we didn't record any sales whatsoever. This makes one think the business has some good points.
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. Our information indicates that De La Rue insiders own about UK£232k worth of shares. However, it's possible that insiders might have an indirect interest through a more complex structure. This level of insider ownership is notably low, and not very encouraging.
So What Does This Data Suggest About De La Rue Insiders?
The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. While the overall levels of insider ownership are below what we'd like to see, the history of transactions imply that De La Rue insiders are reasonably well aligned, 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. For example, De La Rue has 4 warning signs (and 3 which are concerning) we think you should know about.
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.
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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