It is usually uneventful when a single insider buys stock. However, When quite a few insiders buy shares, as it happened in Servcorp Limited's( ASX:SRV ) case, it's fantastic news for shareholders.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.
Servcorp Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Founder Alfred Moufarrige for AU$241k worth of shares, at about AU$5.03 per share. Even though the purchase was made at a significantly lower price than the recent price (AU$6.99), 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.
Servcorp 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. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
View our latest analysis for Servcorp
There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insider Ownership
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Our data suggests Servcorp insiders own 0.8% of the company, worth about AU$5.9m. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. We prefer to see high levels of insider ownership.
So What Does This Data Suggest About Servcorp Insiders?
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. While we have no worries about the insider transactions, we'd be more comfortable if they owned more Servcorp stock. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Servcorp. For example - Servcorp has 1 warning sign we think you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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 of direct interests only, but not derivative transactions or indirect interests.
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This article by Simply Wall St is general in nature.
We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice.
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.
