Insiders of Paragon Care Limited (ASX:PGC) must be disappointed as stock fell 12% after recent purchases

Key Insights

• Significant insider control over Paragon Care implies vested interests in company growth
• The top 2 shareholders own 57% of the company
• Insiders have been buying lately

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A look at the shareholders of Paragon Care Limited (ASX:PGC) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are individual insiders with 67% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Notably, insiders have bought shares recently. Their expectations, however, were not satisfied, as the market cap dropped to AU$439m over the past week.

In the chart below, we zoom in on the different ownership groups of Paragon Care.

View our latest analysis for Paragon Care

What Does The Institutional Ownership Tell Us About Paragon Care?

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.

We can see that Paragon Care 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Paragon Care's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Paragon Care. The company's largest shareholder is Peter Lacaze, with ownership of 29%. Meanwhile, the second and third largest shareholders, hold 29% and 8.7%, of the shares outstanding, respectively. John Walstab, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 57% stake.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Paragon Care

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.

It seems that insiders own more than half the Paragon Care Limited stock. This gives them a lot of power. So they have a AU$295m stake in this AU$439m business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 21% 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Paragon Care .

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.

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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.