Having purchased CA$1.2m worth of CAE Inc. (TSE:CAE) stock, the recent 20% pullback is not what insiders may have expected

  • In Business
  • 2022-08-13 14:38:34Z
  • By Simply Wall St.

Insiders who bought CA$1.2m worth of CAE Inc.'s (TSE:CAE) stock at an average buy price of CA$31.32 over the last year may be disappointed by the recent 20% decrease in the stock. Insiders purchase with the hope of seeing their investments increase in value over time. However, due to recent losses, their initial investment is now only worth CA$1.0m, which is not great.

While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for CAE

The Last 12 Months Of Insider Transactions At CAE

Over the last year, we can see that the biggest insider purchase was by President Marc Parent for CA$1.1m worth of shares, at about CA$31.22 per share. That means that an insider was happy to buy shares at above the current price of CA$27.56. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

In the last twelve months CAE 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 click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

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.

Insiders At CAE Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at CAE. Specifically, President Marc Parent bought CA$1.1m worth of shares in that time, and we didn't record any sales whatsoever. This could be interpreted as suggesting a positive outlook.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. CAE insiders own about CA$14m worth of shares. That equates to 0.2% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

What Might The Insider Transactions At CAE Tell Us?

It's certainly positive to see the recent insider purchase. And the longer term insider transactions also give us confidence. When combined with notable insider ownership, these factors suggest CAE insiders are well aligned, and that they may think the share price is too low. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. When we did our research, we found 2 warning signs for CAE (1 is potentially serious!) that we believe deserve your full attention.

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.

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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