What You Need To Know About FirstService Corporation's (TSE:FSV) Investor Composition

By
Simply Wall St
Published
July 01, 2021
TSX:FSV
Source: Shutterstock

The big shareholder groups in FirstService Corporation (TSE:FSV) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. 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 has a market capitalization of CA$9.4b, so it's too big to fly under the radar. We'd expect to see both institutions and retail investors owning a portion of the company. In the chart below, we can see that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholders can tell us about FirstService.

See our latest analysis for FirstService

ownership-breakdown
TSX:FSV Ownership Breakdown July 1st 2021

What Does The Institutional Ownership Tell Us About FirstService?

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 FirstService 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of FirstService, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
TSX:FSV Earnings and Revenue Growth July 1st 2021

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. It looks like hedge funds own 7.3% of FirstService shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Looking at our data, we can see that the largest shareholder is T. Rowe Price Group, Inc. with 12% of shares outstanding. With 11% and 7.3% of the shares outstanding respectively, Jay Hennick and Durable Capital Partners, LP are the second and third largest shareholders. Jay Hennick, who is the second-largest shareholder, also happens to hold the title of Top Key Executive.

We did some more digging and found that 9 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of FirstService

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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 FirstService Corporation. It is very interesting to see that insiders have a meaningful CA$1.2b stake in this CA$9.4b business. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

With a 13% ownership, the general public have some degree of sway over FirstService. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand FirstService better, we need to consider many other factors. For example, we've discovered 2 warning signs for FirstService that you should be aware of before investing here.

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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