Could Servcorp Limited's (ASX:SRV) Investor Composition Influence The Stock Price?

February 20, 2020
  •  Updated
October 05, 2022
ASX:SRV
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A look at the shareholders of Servcorp Limited (ASX:SRV) 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. We also tend to see lower insider ownership in companies that were previously publicly owned.

Servcorp is not a large company by global standards. It has a market capitalization of AU$392m, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it's seems that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about Servcorp.

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ASX:SRV Ownership Summary, February 21st 2020
ASX:SRV Ownership Summary, February 21st 2020

What Does The Institutional Ownership Tell Us About Servcorp?

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.

Servcorp already has institutions on the share registry. Indeed, they own 9.8% of the company. 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. 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 Servcorp's historic earnings and revenue, below, but keep in mind there's always more to the story.

ASX:SRV Income Statement, February 21st 2020
ASX:SRV Income Statement, February 21st 2020

Hedge funds don't have many shares in Servcorp. The company's largest shareholder is Sovori Pty Ltd, with ownership of 48%, Next, we have FMR LLC and BFLI Pty Ltd as the second and third largest shareholders, holding 6.1% and 1.9%, of the shares outstanding, respectively.

Our analysis suggests that the top 2 shareholders collectively control 54% of the company's shares, implying that they have considerable power to influence the company's decisions.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Servcorp

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.

We can see that insiders own shares in Servcorp Limited. In their own names, insiders own AU$8.9m worth of stock in the AU$392m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 36% ownership, the general public have some degree of sway over SRV. 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 52%, 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:

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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Servcorp , and understanding them should be part of your investment process.

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.

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.

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. Thank you for reading.

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