Insiders Buying Vital Metals Might Wish They Invested More, Stock Gains 12%

Vital Metals Limited (ASX:VML) insiders who bought shares over the past year were rewarded handsomely last week. The stock rose 12%, resulting in a AU$4.7m rise in the company's market capitalisation, translating to a gain of 78% on their initial investment. As a result, their original purchase of AU$89.0k worth of stock is now worth AU$158.3k.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

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The Last 12 Months Of Insider Transactions At Vital Metals

Over the last year, we can see that the biggest insider purchase was by Non-Executive Director Alexius Chan for AU$84k worth of shares, at about AU$0.10 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$0.19. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.

Vital Metals insiders may have bought shares in the last year, but they didn't sell any. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

View our latest analysis for Vital Metals

There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insiders At Vital Metals Have Bought Stock Recently

Over the last quarter, Vital Metals insiders have spent a meaningful amount on shares. We can see that Non-Executive Director Alexius Chan paid AU$84k for shares in the company. No-one sold. That shows some optimism about the company's future.

Does Vital Metals Boast High 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. We usually like to see fairly high levels of insider ownership. Our data indicates that Vital Metals insiders own about AU$2.8m worth of shares (which is 6.2% of the company). However, it's possible that insiders might have an indirect interest through a more complex structure. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!

So What Do The Vital Metals Insider Transactions Indicate?

It's certainly positive to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. But we don't feel the same about the fact the company is making losses. On this analysis the only slight negative we see is the fairly low (overall) insider ownership; their transactions suggest that they are quite positive on Vital Metals stock. 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 5 warning signs for Vital Metals (4 are concerning!) that we believe deserve your full attention.

Of course Vital Metals 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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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.