Usually, when one insider buys stock, it might not be a monumental event. But when multiple insiders are buying like they did in the case of Forrestania Resources Limited (ASX:FRS), that sends out a positive message to the company's shareholders.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

Check out our latest analysis for Forrestania Resources

Forrestania Resources Insider Transactions Over The Last Year

In fact, the recent purchase by Adam Turnbull was the biggest purchase of Forrestania Resources shares made by an insider individual in the last twelve months, according to our records. That means that even when the share price was higher than AU$0.023 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

In the last twelve months Forrestania Resources insiders were buying shares, but not selling. They paid about AU$0.023 on average. It's great to see insiders putting their own cash into the company's stock, albeit at below the recent share price. 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!

Forrestania Resources 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.

Insiders At Forrestania Resources Have Bought Stock Recently

It's good to see that Forrestania Resources insiders have made notable investments in the company's shares. In total, insiders bought AU$550k worth of shares in that time, and we didn't record any sales whatsoever. This makes one think the business has some good points.

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. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 35% of Forrestania Resources 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 Forrestania Resources Tell Us?

It is good to see recent purchasing. 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. When combined with notable insider ownership, these factors suggest Forrestania Resources insiders are well aligned, and that they may think the share price is too low. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. Case in point: We've spotted 4 warning signs for Forrestania Resources you should be aware of.

But note: Forrestania Resources may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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 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.