Could The America’s Car-Mart, Inc. (NASDAQ:CRMT) Ownership Structure Tell Us Something Useful?

Every investor in America’s Car-Mart, Inc. (NASDAQ:CRMT) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. Warren Buffett said that he likes ‘a business with enduring competitive advantages that is run by able and owner-oriented people’. So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.

With a market capitalization of US$593m, America’s Car-Mart 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. Let’s delve deeper into each type of owner, to discover more about CRMT.

View our latest analysis for America’s Car-Mart

NasdaqGS:CRMT Ownership Summary, July 27th 2019
NasdaqGS:CRMT Ownership Summary, July 27th 2019

What Does The Institutional Ownership Tell Us About America’s Car-Mart?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

America’s Car-Mart already has institutions on the share registry. Indeed, they own 82% 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of America’s Car-Mart, (below). Of course, keep in mind that there are other factors to consider, too.

NasdaqGS:CRMT Income Statement, July 27th 2019
NasdaqGS:CRMT Income Statement, July 27th 2019

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don’t have many shares in America’s Car-Mart. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of America’s Car-Mart

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own some shares in America’s Car-Mart, Inc.. In their own names, insiders own US$38m worth of stock in the US$593m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 11% ownership, the general public have some degree of sway over CRMT. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

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.