Is K-Bro Linen Inc. (TSE:KBL) Popular Amongst Institutions?

By
Simply Wall St
Published
November 23, 2020
TSX:KBL

Every investor in K-Bro Linen Inc. (TSE:KBL) should be aware of the most powerful shareholder groups. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Companies that used to be publicly owned tend to have lower insider ownership.

K-Bro Linen is not a large company by global standards. It has a market capitalization of CA$363m, which means it wouldn't have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about K-Bro Linen.

View our latest analysis for K-Bro Linen

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TSX:KBL Ownership Breakdown November 23rd 2020

What Does The Institutional Ownership Tell Us About K-Bro Linen?

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 K-Bro Linen 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 K-Bro Linen's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
TSX:KBL Earnings and Revenue Growth November 23rd 2020

We note that hedge funds don't have a meaningful investment in K-Bro Linen. Our data shows that CI Investments Inc. is the largest shareholder with 13% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.0% and 4.2% of the stock. Furthermore, CEO Linda McCurdy is the owner of 1.6% of the company's shares.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of K-Bro Linen

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Shareholders would probably be interested to learn that insiders own shares in K-Bro Linen Inc.. As individuals, the insiders collectively own CA$13m worth of the CA$363m 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 -- mostly retail investors -- own 53% of K-Bro Linen. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for K-Bro Linen (of which 1 shouldn't be ignored!) you should know about.

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. 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.
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