Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Royal Mail plc (LON:RMG).
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 on the market. 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 logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At Royal Mail
Group CEO & Director Rico Back made the biggest insider purchase in the last 12 months. That single transaction was for UK£415k worth of shares at a price of UK£2.08 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being UK£2.00). Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
Happily, we note that in the last year insiders bought 528k shares for a total of UK£1.2m. While Royal Mail insiders bought shares last year, they didn't sell. You can see the insider transactions (by 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!
Royal Mail is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insiders at Royal Mail Have Bought Stock Recently
Over the last quarter, Royal Mail insiders have spent a meaningful amount on shares. We can see that Rico Back paid UK£913k for shares in the company. No-one sold. This makes one think the business has some good points.
Does Royal Mail Boast High 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. We usually like to see fairly high levels of insider ownership. From looking at our data, insiders own UK£2.5m worth of Royal Mail stock, about 0.1% of the company. We prefer to see high levels of insider ownership.
So What Does This Data Suggest About Royal Mail Insiders?
The recent insider purchase is heartening. And the longer term insider transactions also give us confidence. On this analysis the only slight negative we see is the fairly low (overall) insider ownership; their transactions suggest that they are quite positive on Royal Mail stock. Of course, the future is what matters most. So if you are interested in Royal Mail, you should check out this free report on analyst forecasts for the company.
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 aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.