With Key Petroleum Up 37%, Insider Buyers Count Their Returns

Key Petroleum Limited (ASX:KEY) insiders who bought shares over the past year were rewarded handsomely last week. The stock rose 37%, resulting in a AU$1.3m rise in the company's market capitalisation, translating to a gain of 116% on their initial investment. As a result, their original purchase of AU$234.9k worth of stock is now worth AU$507.6k.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

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The Last 12 Months Of Insider Transactions At Key Petroleum

Over the last year, we can see that the biggest insider purchase was by insider Beibei Chen for AU$235k worth of shares, at about AU$0.058 per share. Even though the purchase was made at a significantly lower price than the recent price (AU$0.13), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.

You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

Check out our latest analysis for Key Petroleum

Key Petroleum is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.

Does Key Petroleum Boast High Insider Ownership?

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. 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 39% of Key Petroleum shares, worth about AU$1.9m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

What Might The Insider Transactions At Key Petroleum Tell Us?

It doesn't really mean much that no insider has traded Key Petroleum shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. Insiders do have a stake in Key Petroleum and their transactions don't cause us concern. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Key Petroleum. Case in point: We've spotted 3 warning signs for Key Petroleum you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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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.