Institutional owners may ignore Embraer S.A.'s (BVMF:EMBR3) recent R$2.0b market cap decline as longer-term profits stay in the green

Key Insights

• Given the large stake in the stock by institutions, Embraer's stock price might be vulnerable to their trading decisions
• A total of 15 investors have a majority stake in the company with 50% ownership
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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Every investor in Embraer S.A. (BVMF:EMBR3) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 76% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 3.3% in value last week. However, the 53% one-year return to shareholders might have softened the blow. They should, however, be mindful of further losses in the future.

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

View our latest analysis for Embraer

What Does The Institutional Ownership Tell Us About Embraer?

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.

Embraer already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Embraer's earnings history below. Of course, the future is what really matters.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Embraer. Our data shows that Brandes Investment Partners, LP is the largest shareholder with 14% of shares outstanding. With 5.6% and 5.4% of the shares outstanding respectively, BlackRock, Inc. and BNDES Participações S.A. - BNDESPAR are the second and third largest shareholders.

After doing some more digging, we found that the top 15 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Embraer

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our data cannot confirm that board members are holding shares personally. Given we are not picking up on insider ownership, we may have missing data. Therefore, it would be interesting to assess the CEO compensation and tenure, here.

General Public Ownership

With a 18% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Embraer. 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.

Private Equity Ownership

With a stake of 5.4%, private equity firms could influence the Embraer board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

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.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.