As NICO Resources Limited (ASX:NC1) drops to AU$49m market cap, insiders might rethink their AU$16m stock purchase earlier this year
The recent price decline of 22% in NICO Resources Limited's (ASX:NC1) stock may have disappointed insiders who bought AU$16m worth of shares at an average price of AU$0.77 in the past 12 months. Insiders purchase with the hope of seeing their investments increase in value over time. However, due to recent losses, their initial investment is now only worth AU$11m, which is not great.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.
View our latest analysis for NICO Resources
NICO Resources Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when insider Deborah Collins-Corps bought AU$5.8m worth of shares at a price of AU$0.62 per share. That means that even when the share price was higher than AU$0.54 (the recent price), an insider wanted to purchase shares. 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. 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.
While NICO Resources insiders bought shares during the last year, they didn't sell. Their average price was about AU$0.77. This is nice to see since it implies that insiders might see value around current prices. 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!
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 NICO Resources Boast High 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. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 29% of NICO Resources shares, worth about AU$14m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About NICO Resources Insiders?
The fact that there have been no NICO Resources insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in NICO Resources and their transactions don't cause us concern. 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. When we did our research, we found 2 warning signs for NICO Resources (1 is a bit unpleasant!) that we believe deserve your full attention.
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, but not derivative transactions.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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