Looking at Schaffer Corporation Limited's (ASX:SFC ) insider transactions over the last year, we can see that insiders were net buyers. That is, there were more number of shares purchased by insiders than there were sold.

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.

We've discovered 3 warning signs about Schaffer. View them for free.

Schaffer Insider Transactions Over The Last Year

The Non-Executive Independent Director David Schwartz made the biggest insider purchase in the last 12 months. That single transaction was for AU$149k worth of shares at a price of AU$22.00 each. That means that even when the share price was higher than AU$21.23 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. David Schwartz was the only individual insider to buy during the last year.

David Schwartz purchased 17.14k shares over the year. The average price per share was AU$21.56. 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!

Check out our latest analysis for Schaffer

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Schaffer insiders own about AU$143m worth of shares (which is 50% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Do The Schaffer Insider Transactions Indicate?

There haven't been any insider transactions in the last three months -- that doesn't mean much. But insiders have shown more of an appetite for the stock, over the last year. With high insider ownership and encouraging transactions, it seems like Schaffer insiders think the business has merit. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Be aware that Schaffer is showing 3 warning signs in our investment analysis, and 1 of those is potentially serious...