It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So shareholders might well want to know whether insiders have been buying or selling shares in Westport Fuel Systems Inc. (TSE:WPRT).

What Is Insider Buying?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, such insiders must disclose their trading activities, and not trade on inside information.

We don’t think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Colombia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.

View our latest analysis for Westport Fuel Systems

The Last 12 Months Of Insider Transactions At Westport Fuel Systems

Over the last year, we can see that the biggest insider sale was by Executive Vice President of Electronics Group James Arthurs for CA$469k worth of shares, at about CA$3.69 per share. That is hardly a positive sign, even though it took place above the latest price (CA$1.95). So it may not tell us anything about how insiders feel about the current share price. Notably James Arthurs was also the biggest buyer, having purchased CA$63k worth of shares.

Over the last year we saw more insider selling of Westport Fuel Systems shares, than buying. The sellers received a price of around US$3.83, on average. It is certainly not great to see that insiders have sold shares in the company. But the selling was at much higher prices than the current share price (CA$1.95), so it probably doesn’t tell us a lot about the value on offer today. The chart below shows insider transactions over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Insider Ownership of Westport Fuel Systems

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. Westport Fuel Systems insiders own 17% of the company, currently worth about CA$47m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Westport Fuel Systems Tell Us?

The fact that there have been no Westport Fuel Systems insider transactions recently certainly doesn’t bother us. Our analysis of Westport Fuel Systems insider transactions leaves us cautious. The modest level of insider ownership is, at least, some comfort. Of course, the future is what matters most. So if you are interested in Westport Fuel Systems, you should check out this free report on analyst forecasts for the company.

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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.