Don't Ignore The Insider Selling In Paramount Resources

Some Paramount Resources Ltd. (TSE:POU) shareholders may be a little concerned to see that the Executive Vice President of Operations, David Reid, recently sold a substantial CA$1.1m worth of stock at a price of CA$31.00 per share. That's a big disposal, and it decreased their holding size by 18%, which is notable but not too bad.

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Paramount Resources Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the Executive Vice President of Corporate Development & Planning, Rodrigo Sousa, for CA$1.8m worth of shares, at about CA$30.13 per share. That means that even when the share price was below the current price of CA$31.29, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 13% of Rodrigo Sousa's holding. Notably Rodrigo Sousa was also the biggest buyer, having purchased CA$1.0m worth of shares.

In the last twelve months insiders purchased 35.07k shares for CA$1.0m. But they sold 238.54k shares for CA$7.1m. Over the last year we saw more insider selling of Paramount Resources shares, than buying. 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!

Check out our latest analysis for Paramount Resources

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Insider Ownership

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 1.3% of Paramount Resources shares, worth about CA$60m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Does This Data Suggest About Paramount Resources Insiders?

The stark truth for Paramount Resources is that there has been more insider selling than insider buying in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. So we'd only buy after careful consideration. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. When we did our research, we found 2 warning signs for Paramount Resources (1 shouldn't be ignored!) that we believe deserve your full attention.

Of course Paramount Resources may not be the best stock to buy. So you may wish to see this free collection of high quality 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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