The recent 13% drop in Nova Minerals Limited's (ASX:NVA) stock could come as a blow to insiders who purchased AU$639.4k worth of stock at an average buy price of AU$0.25 over the past 12 months. Insiders buy with the expectation to see their investments rise in value over a period of time. However, recent losses have rendered their above investment worth AU$345.9k which is not ideal.

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

View our latest analysis for Nova Minerals

Nova Minerals Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when CEO & Executive Director Christopher Gerteisen bought AU$200k worth of shares at a price of AU$0.24 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.14). 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. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

In the last twelve months Nova Minerals insiders were buying shares, but not selling. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

Nova Minerals 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.

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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 9.0% of Nova Minerals shares, worth about AU$3.0m, according to our data. But they may have an indirect interest through a corporate structure that we haven't picked up on. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!

So What Do The Nova Minerals Insider Transactions Indicate?

There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. The transactions are fine but it'd be more encouraging if Nova Minerals insiders bought more shares in the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Nova Minerals. To that end, you should learn about the 6 warning signs we've spotted with Nova Minerals (including 2 which are a bit concerning).