Domino's Pizza Enterprises Limited's (ASX:DMP) latest 6.3% decline adds to one-year losses, institutional investors may consider drastic measures

Key Insights

• Significantly high institutional ownership implies Domino's Pizza Enterprises' stock price is sensitive to their trading actions
• The top 4 shareholders own 55% of the company
• Insiders have bought recently

A look at the shareholders of Domino's Pizza Enterprises Limited (ASX:DMP) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 58% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors endured the highest losses after the company's share price fell by 6.3% last week. The recent loss, which adds to a one-year loss of 46% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Domino's Pizza Enterprises which might hurt individual investors.

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

See our latest analysis for Domino's Pizza Enterprises

What Does The Institutional Ownership Tell Us About Domino's Pizza Enterprises?

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.

We can see that Domino's Pizza Enterprises does have institutional investors; and they hold a good portion of the company's stock. 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 Domino's Pizza Enterprises' 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. Domino's Pizza Enterprises is not owned by hedge funds. The company's largest shareholder is Somad Holdings Pty. Ltd., with ownership of 25%. For context, the second largest shareholder holds about 11% of the shares outstanding, followed by an ownership of 9.5% by the third-largest shareholder.

Our research also brought to light the fact that roughly 55% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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 Domino's Pizza Enterprises

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Shareholders would probably be interested to learn that insiders own shares in Domino's Pizza Enterprises Limited. The insiders have a meaningful stake worth AU$132m. Most would see this as a real positive. Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 12% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 25%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Domino's Pizza Enterprises better, we need to consider many other factors. For instance, we've identified 3 warning signs for Domino's Pizza Enterprises that you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.

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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.