Institutional investors must be pleased after a 7.4% gain last week that adds to Metcash Limited's (ASX:MTS) one-year returns

Key Insights

• Given the large stake in the stock by institutions, Metcash's stock price might be vulnerable to their trading decisions
• The top 20 shareholders own 50% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

To get a sense of who is truly in control of Metcash Limited (ASX:MTS), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 52% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Last week’s 7.4% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The one-year return on investment is currently 2.8% and last week's gain would have been more than welcomed.

Let's delve deeper into each type of owner of Metcash, beginning with the chart below.

View our latest analysis for Metcash

What Does The Institutional Ownership Tell Us About Metcash?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that Metcash does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Metcash's earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Metcash. Pendal Group Limited is currently the company's largest shareholder with 7.0% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.3% and 6.2%, of the shares outstanding, respectively.

A closer look at our ownership figures suggests that the top 20 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Metcash

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.

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 data suggests that insiders own under 1% of Metcash Limited in their own names. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around AU$9.6m worth of shares (at current prices). Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 47% stake in the company, and hence can't easily be ignored. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Metcash better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Metcash you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.