The recent price decline of 12% in AdAlta Limited's (ASX:1AD) stock may have disappointed insiders who bought AU$99.5k worth of shares at an average price of AU$0.026 in the past 12 months. Insiders invest with the hopes of seeing their money grow in value over time. However, as a result of recent losses, their initial investment is now only worth AU$56.6k, which is not what they expected.

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.

View our latest analysis for AdAlta

AdAlta Insider Transactions Over The Last Year

The insider Stuart Morris made the biggest insider purchase in the last 12 months. That single transaction was for AU$97k worth of shares at a price of AU$0.027 each. That means that an insider was happy to buy shares at above the current price of AU$0.015. It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for shares. 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.

While AdAlta insiders bought shares during the last year, they didn't sell. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

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).

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. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 31% of AdAlta shares, worth about AU$2.9m. 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 Do The AdAlta Insider Transactions Indicate?

The fact that there have been no AdAlta insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in AdAlta and we see no evidence to suggest they are worried about the future. 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. To help with this, we've discovered 4 warning signs (2 are potentially serious!) that you ought to be aware of before buying any shares in AdAlta.

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 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.