We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we’ll take a look at whether insiders have been buying or selling shares in CFOAM Limited (ASX:CFO).

What Is Insider Selling?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, rules govern insider transactions, and certain disclosures are required.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.

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CFOAM Insider Transactions Over The Last Year

While no particular insider transaction stood out, we can still look at the overall trading.

Over the last year, we can see that insiders have bought 1.45m shares worth AU$273k. In the last twelve months there was more buying than selling by CFOAM insiders. Their average price was about AU$0.19. I’d consider this a positive as it suggests insiders see value at around the current price, which is AU$0.15. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

CFOAM Insiders Bought Stock Recently

Over the last three months, we’ve seen significant insider buying at CFOAM. Specifically, Toby Robert Chandler bought US$93k worth of shares in that time, and we didn’t record any sales whatsoever. This makes one think the business has some good points.

Insider Ownership of CFOAM

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. CFOAM insiders own about AU$6.7m worth of shares (which is 41% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The CFOAM Insider Transactions Indicate?

It is good to see recent insider purchase. We also take confidence from the longer term picture of insider transactions. But on the other hand, the company made a loss last year, which makes us a little cautious. Once you factor in the high insider ownership, it certainly seems like insiders are positive about CFOAM. Nice! 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 .

If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, that have HIGH return on equity 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.