Institutional owners may ignore Direcional Engenharia S.A.'s (BVMF:DIRR3) recent R$280m market cap decline as longer-term profits stay in the green

Key Insights

• Significantly high institutional ownership implies Direcional Engenharia's stock price is sensitive to their trading actions
• The top 6 shareholders own 52% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of Direcional Engenharia S.A. (BVMF:DIRR3) can tell us which group is most powerful. With 40% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Institutional investors was the group most impacted after the company's market cap fell to R$3.1b last week. However, the 22% one-year return to shareholders may have helped lessen their pain. But they would probably be wary of future losses.

Let's take a closer look to see what the different types of shareholders can tell us about Direcional Engenharia.

See our latest analysis for Direcional Engenharia

What Does The Institutional Ownership Tell Us About Direcional Engenharia?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that Direcional Engenharia 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. 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 Direcional Engenharia's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Direcional Engenharia. The company's largest shareholder is Filadelphia Participações Ltda., with ownership of 26%. For context, the second largest shareholder holds about 8.9% of the shares outstanding, followed by an ownership of 8.6% by the third-largest shareholder. Additionally, the company's CEO Ricardo Valadares Gontijo directly holds 2.0% of the total shares outstanding.

On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Direcional Engenharia

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 most recent data indicates that insiders own some shares in Direcional Engenharia S.A.. As individuals, the insiders collectively own R$111m worth of the R$3.1b company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 31% stake in Direcional Engenharia. 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 26%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

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. For instance, we've identified 2 warning signs for Direcional Engenharia that you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.