Could DIRTT Environmental Solutions Ltd.’s (TSE:DRT) Investor Composition Influence The Stock Price?

A look at the shareholders of DIRTT Environmental Solutions Ltd. (TSE:DRT) can tell us which group is most powerful. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. Companies that have been privatized tend to have low insider ownership.

With a market capitalization of CA$561m, DIRTT Environmental Solutions is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about DRT.

View our latest analysis for DIRTT Environmental Solutions

TSX:DRT Ownership Summary, August 19th 2019
TSX:DRT Ownership Summary, August 19th 2019

What Does The Institutional Ownership Tell Us About DIRTT Environmental Solutions?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

DIRTT Environmental Solutions already has institutions on the share registry. Indeed, they own 35% of the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It’s therefore worth looking at DIRTT Environmental Solutions’s earnings history, below. Of course, the future is what really matters.

TSX:DRT Income Statement, August 19th 2019
TSX:DRT Income Statement, August 19th 2019

We note that hedge funds don’t have a meaningful investment in DIRTT Environmental Solutions. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of DIRTT Environmental Solutions

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own less than 1% of DIRTT Environmental Solutions Ltd.. It seems the board members have no more than CA$2.5m worth of shares in the CA$561m company. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

The general public, mostly retail investors, hold a substantial 65% stake in DRT, suggesting it is a fairly popular stock. With this size of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.