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As Xero Limited's market cap (ASX:XRO) drops to AU$13b, insiders might be questioning their decision to buy earlier this year

The recent 3.9% drop in Xero Limited's (ASX:XRO) stock could come as a blow to insiders who purchased NZ$746k worth of stock at an average buy price of NZ$112 over the past 12 months. This is not good as insiders invest based on expectations that their money will appreciate over time. However, as a result of recent losses, their original investment is now worth only NZ$582k.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for Xero

Xero Insider Transactions Over The Last Year

The Independent Non-Executive Director Brian McAndrews made the biggest insider purchase in the last 12 months. That single transaction was for AU$333k worth of shares at a price of AU$111 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$87.14). 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. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

In the last twelve months Xero insiders were buying shares, but not selling. You can see the insider transactions (by companies and 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!

insider-trading-volume
insider-trading-volume

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

Does Xero Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Xero insiders own 10% of the company, worth about AU$1.3b. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Xero Tell Us?

It doesn't really mean much that no insider has traded Xero shares in the last quarter. However, our analysis of transactions over the last year is heartening. Judging from their transactions, and high insider ownership, Xero insiders feel good about the company's future. Of course, the future is what matters most. So if you are interested in Xero, you should check out this free report on analyst forecasts for the company.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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