In this article, I’m going to take a look at engage:BDR Limited’s (ASX:EN1) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. Different types of investors can have varying degrees of influence on a company’s management team. For example, an active institutional investor may be more likely to hold a company accountable for certain actions whereas a passive fund will move in and out of stocks without regards to corporate governance. The implications of these institutions’ actions can either benefit or hinder individual investors, so it is important to understand the ownership composition of your stock investment. Therefore, I will take a look at EN1’s shareholders in more detail.
Institutional OwnershipInstitutional investors are one of the largest group of market participants and their buy-sell decisions on a company’s stock can significantly impact prices, more so, when there are relatively small amounts of shares available on the market to trade. The company hardly has institutions in its ownership structure, indicating limited concern for investors to worry about potential sell-offs that could arise due to extensive liquidation.
Insider OwnershipAn important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. EN1 insiders hold a significant stake of 49.19% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). Another aspect of insider ownership is to learn about their recent transactions. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.
General Public OwnershipA big stake of 26.14% in EN1 is held by the general public. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.
Private Equity OwnershipWith a stake of 20.80%, private equity firms form another important class of owners in EN1. With a stake of 20.80%, they can influence EN1’s key policy decisions. An investor should be encouraged by the ownership of these institutions who are known to be experts in increasing efficiency, improving capital structure and opting for value-accretive policy decisions.
Private Company OwnershipAnother group of owners that a potential investor in EN1 should consider are private companies, with a stake of 2.88%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence EN1’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
With a low level of institutional ownership, investors in EN1 need not worry about non-fundamental factors such as ownership structure causing large impact on stock prices. However, ownership structure should not be the only focus of your research when constructing an investment thesis around EN1. Instead, you should be evaluating company-specific factors such as engage:BDR’s past track record and financial health. I urge you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for EN1’s future growth? Take a look at our free research report of analyst consensus for EN1’s outlook.
- Financial Health: Are EN1’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.