Eastern Goldfields Limited operates as a gold exploration and production company primarily in Australia. Eastern Goldfields’s insiders have invested more than 30 million shares in the small-cap stocks within the past three months. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal. A research published in The MIT Press (1998) concluded that stocks following insider buying outperformed the market by 4.5%. But these signals may not be sufficient to gain confidence on whether to invest. I’ve assessed two potential reasons behind the insiders’ latest motivation to buy more shares.
Check out our latest analysis for Eastern Goldfields
Who Are Ramping Up Their Shares?
There were more Eastern Goldfields insiders that have bought shares than those that have sold. In total, individual insiders own over 56 million shares in the business, which makes up around 7.35% of total shares outstanding. .
The entity that bought on the open market in the last three months was
Perennial Value Management 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.
Does Buying Activity Reflect Future Growth?
At first glance, Eastern Goldfields’s future looks optimistic. Probing further into annual growth rates,analysts anticipate a large double-digit top-line growth over the next year, which This could be anticipated by insiders given their positive signal of net buying activity. However, they may merely believe the market has overly-discounted share price which provides an opportune time to buy.
Did Stock Price Volatility Instigate Buying?
An alternative reason for recent trades could be insiders taking advantage of the share price volatility. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. Within the past three months, Eastern Goldfields’s share price traded at a high of A$0.17 and a low of A$0.14. This suggests reasonable volatility with a change of 21.43%. This may not be large enough to warrant any significant purchases, therefore the underlying driver may be the insiders’ belief of company growth prospects or simply their personal portfolio rebalancing.
Next Steps:
Eastern Goldfields’s insider meaningful buying activity tells us the shares are currently in favour, which is fairly consistent with earnings growth expectations, although the share price has not moved significantly to warrant reassessment of mispricing. However, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. there are two essential aspects you should further research: