Stock Analysis

What Kind Of Investors Own Most Of Nitro Software Limited (ASX:NTO)?

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ASX:NTO
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A look at the shareholders of Nitro Software Limited (ASX:NTO) can tell us which group is most powerful. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

With a market capitalization of AU$555m, Nitro Software is a small cap stock, so it might not be well known by many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about Nitro Software.

View our latest analysis for Nitro Software

ownership-breakdown
ASX:NTO Ownership Breakdown December 8th 2020

What Does The Institutional Ownership Tell Us About Nitro Software?

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 Nitro Software does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Nitro Software's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
ASX:NTO Earnings and Revenue Growth December 8th 2020

Our data indicates that hedge funds own 9.1% of Nitro Software. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Starfish Ventures Pty Ltd is currently the company's largest shareholder with 9.2% of shares outstanding. In comparison, the second and third largest shareholders hold about 9.1% and 8.8% of the stock. Furthermore, CEO Sam Chandler is the owner of 2.2% of the company's shares.

We also observed that the top 8 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Nitro Software

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.

Our most recent data indicates that insiders own a reasonable proportion of Nitro Software Limited. Insiders have a AU$88m stake in this AU$555m business. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. 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 Nitro Software. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 18%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

We can see that Private Companies own 4.8%, 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 Nitro Software better, we need to consider many other factors. For example, we've discovered 2 warning signs for Nitro Software that you should be aware of before investing here.

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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