It is usually uneventful when a single insider buys stock. However, When quite a few insiders buy shares, as it happened in Mayfield Childcare Limited's (ASX:MFD) 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 do think it is perfectly logical to keep tabs on what insiders are doing.
Mayfield Childcare Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by insider Michael Kroger for AU$700k worth of shares, at about AU$1.05 per share. That means that an insider was happy to buy shares at above the current price of AU$1.01. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. We always take careful note of the price insiders pay when purchasing 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.
Mayfield Childcare 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. By clicking on the graph below, you can see the precise details of each insider transaction!
Mayfield Childcare is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insider Ownership Of Mayfield Childcare
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. It appears that Mayfield Childcare insiders own 16% of the company, worth about AU$11m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Mayfield Childcare Tell Us?
The fact that there have been no Mayfield Childcare insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Overall we don't see anything to make us think Mayfield Childcare insiders are doubting the company, and they do own shares. 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. Every company has risks, and we've spotted 4 warning signs for Mayfield Childcare (of which 1 doesn't sit too well with us!) you should know about.
Of course Mayfield Childcare 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.
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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