Echo Resources Limited engages in the exploration and development of gold properties. Echo Resources is one of Australia’s small-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 19 million shares during this period. Generally, insiders buying more shares in their own firm sends a bullish signal. A research published in The MIT Press (1998) concluded that stocks following insider buying outperformed the market by 4.5%. However, it may not be sufficient to base your investment decision merely on these signals. Today we will evaluate whether these decisions are bolstered by analysts’ expectations of future growth as well as recent share price movements.

View our latest analysis for Echo Resources

Who Are Ramping Up Their Shares?

Over the past three months, more shares have been bought than sold by Echo Resources’s’ insiders. In total, individual insiders own over 77 million shares in the business, which makes up around 15.71% of total shares outstanding. .

The entity that bought on the open market in the last three months was

1832 Asset Management L.P. Northern Star Resources Limited. Although this is an institutional investor, rather than a company executive or board member, the insights gained from direct access to management as a large investor would make it more well-informed than the average retail investor. In this specific instance, I would classify this investor as a company insider.

Is Future Growth Outlook As Bullish?

At a very high level, Echo Resources’s future looks optimistic. Delving deeper into the line items,analysts anticipate a large double-digit top-line growth over the next year, which is expected to drive significant expected earnings growth as well. This could indicate some degree of economies of scale which may have a compounding impact in the future. Insiders’ conviction in this strong performance is signalled by their net buying activity. Or perhaps they merely see the stock undervalued by the market relative to the growth potential it will deliver.

Did Insiders Buy On Share Price Volatility?

Alternatively, the timing of these insider transactions may have been driven by share price volatility. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. Within the past three months, Echo Resources’s share price traded at a high of A$0.4 and a low of A$0.28. This indicates reasonably high share price volatility with a change of 40.35%. Insiders may deem this relatively meaningful movement as an opportunity to increase their shareholdings.