Don't Ignore The Insider Selling In Scales
Anyone interested in Scales Corporation Limited (NZSE:SCL) should probably be aware that the CEO, MD & Executive Director, Andrew Borland, recently divested NZ$637k worth of shares in the company, at an average price of NZ$6.37 each. On the bright side, that sale was only 7.2% of their holding, so we doubt it's very meaningful, on its own.
The Last 12 Months Of Insider Transactions At Scales
Over the last year, we can see that the biggest insider purchase was by Non-Executive Independent Director Miranda Burdon for NZ$706k worth of shares, at about NZ$5.93 per share. We do like to see buying, but this purchase was made at well below the current price of NZ$6.60. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
In the last twelve months insiders purchased 124.13k shares for NZ$742k. On the other hand they divested 315.83k shares, for NZ$2.0m. In total, Scales insiders sold more than they bought over the last year. 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!
Check out our latest analysis for Scales
For those who like to find hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.
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. 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 3.5% of Scales shares, worth about NZ$34m. 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 Scales Insiders?
The insider sales have outweighed the insider buying, at Scales, in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. On the plus side, Scales makes money, and is growing profits. Insiders own shares, but we're still pretty cautious, given the history of sales. We're in no rush to buy! 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. In terms of investment risks, we've identified 3 warning signs with Scales and understanding them should be part of your investment process.
Of course Scales 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 of direct interests only, but not derivative transactions or indirect interests.
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