In the last year, multiple insiders have substantially increased their holdings of Compass Diversified (NYSE:CODI) stock, indicating that insiders' optimism about the company's prospects has increased.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

The Last 12 Months Of Insider Transactions At Compass Diversified

The Partner & CEO Elias Sabo made the biggest insider purchase in the last 12 months. That single transaction was for US$2.0m worth of shares at a price of US$22.95 each. That means that even when the share price was higher than US$21.71 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. 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.

In the last twelve months Compass Diversified insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

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.

Insiders At Compass Diversified Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at Compass Diversified. Overall, four insiders shelled out US$845k for shares in the company -- and none sold. This makes one think the business has some good points.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 1.7% of Compass Diversified shares, worth about US$28m. 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 Does This Data Suggest About Compass Diversified Insiders?

The recent insider purchases are heartening. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. Insiders likely see value in Compass Diversified shares, given these transactions (along with notable insider ownership of the company). In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Compass Diversified. For instance, we've identified 3 warning signs for Compass Diversified (2 make us uncomfortable) you should be aware of.

But note: Compass Diversified 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.