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It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Diploma PLC (LON:DPLM).
What Is Insider Buying?
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. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.
The Last 12 Months Of Insider Transactions At Diploma
The CEO & Director Jonathan Thomson made the biggest insider purchase in the last 12 months. That single transaction was for UK£57k worth of shares at a price of UK£21.09 each. We do like to see buying, but this purchase was made at well below the current price of UK£29.82. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
Diploma insiders may have bought shares in the last year, but they didn't sell any. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
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 data suggests Diploma insiders own 0.05% of the company, worth about UK£2.0m. I generally like to see higher levels of ownership.
So What Does This Data Suggest About Diploma Insiders?
It doesn't really mean much that no insider has traded Diploma shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. We'd like to see bigger individual holdings. However, we don't see anything to make us think Diploma insiders are doubting the company. 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 - Diploma has 2 warning signs we think you should be aware of.
Of course Diploma may not be the best stock to buy. So you may wish to see this free collection of high quality 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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