Is FirstService Corporation's (TSE:FSV) Shareholder Ownership Skewed Towards Insiders?

By
Simply Wall St
Published
October 08, 2020
TSX:FSV

The big shareholder groups in FirstService Corporation (TSE:FSV) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. 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.

FirstService is a pretty big company. It has a market capitalization of CA$7.7b. Normally institutions would own a significant portion of a company this size. 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 FirstService.

View our latest analysis for FirstService

ownership-breakdown
TSX:FSV Ownership Breakdown October 8th 2020

What Does The Institutional Ownership Tell Us About FirstService?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

FirstService already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 FirstService's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
TSX:FSV Earnings and Revenue Growth October 8th 2020

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. It would appear that 6.7% of FirstService shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. T. Rowe Price Group, Inc. is currently the largest shareholder, with 12% of shares outstanding. Jay Hennick is the second largest shareholder owning 10% of common stock, and Mackenzie Financial Corporation holds about 6.7% of the company stock. Jay Hennick, who is the second-largest shareholder, also happens to hold the title of Top Key Executive. Additionally, the company's CEO D. Patterson directly holds 2.3% of the total shares outstanding.

On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 FirstService

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 information suggests that insiders maintain a significant holding in FirstService Corporation. It has a market capitalization of just CA$7.7b, and insiders have CA$1.0b worth of shares in their own names. That's quite significant. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, with a 10% stake in the company, will not easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for FirstService you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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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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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