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Should You Be Worried About Insider Transactions At CV Check Ltd (ASX:CV1)?

Micheal Lombardo

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We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we’ll take a look at whether insiders have been buying or selling shares in CV Check Ltd (ASX:CV1).

What Is Insider Selling?

It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.

Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’

Check out our latest analysis for CV Check

The Last 12 Months Of Insider Transactions At CV Check

Over the last year, we can see that the biggest insider sale was by Founder & Non-Executive Director Steven Carolan for AU$2.6m worth of shares, at about AU$0.065 per share. That means that even when the share price was below the current price of AU$0.077, an insider wanted to cash in some shares. Even though it doesn’t necessarily mean anything, that’s certainly not a positive sign, in our book. As a general rule we consider it to be discouraging when insiders are selling below the current price. It is worth noting that this sale was only 49.4% of Steven Carolan’s holding. Steven Carolan was the only individual insider to sell shares in the last twelve months.

Over the last year, we can see that insiders have bought 7.12m shares worth AU$451k. But they sold 39.95m for AU$2.6m. You can see a visual depiction of insider transactions (by 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!

ASX:CV1 Insider Trading February 12th 19

CV Check is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

CV Check Insiders Bought Stock Recently

Over the last three months, we’ve seen significant insider buying at CV Check. Not only was there no selling that we can see, but they collectively bought AU$100k worth of shares. That shows some optimism about the company’s future.

Insider Ownership of CV Check

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 32% of CV Check shares, worth about AU$7.3m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.

So What Does This Data Suggest About CV Check Insiders?

It’s certainly positive to see the recent insider purchases. But we can’t say the same for the transactions over the last 12 months. We don’t take much heart from transactions by CV Check insiders over the last year. But they own a reasonable amount of the company, and there was some buying recently. Overall they seem reasonably aligned. To put this in context, take a look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .

But note: CV Check may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.