The Descartes Systems Group Inc (TSE:DSG) is a favorite amongst institutional investors who own 88%

By
Simply Wall St
Published
February 16, 2022
TSX:DSG
Source: Shutterstock

Every investor in The Descartes Systems Group Inc (TSE:DSG) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 88% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.

Let's delve deeper into each type of owner of Descartes Systems Group, beginning with the chart below.

See our latest analysis for Descartes Systems Group

ownership-breakdown
TSX:DSG Ownership Breakdown February 16th 2022

What Does The Institutional Ownership Tell Us About Descartes Systems Group?

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.

We can see that Descartes Systems Group does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Descartes Systems Group, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
TSX:DSG Earnings and Revenue Growth February 16th 2022

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Descartes Systems Group. T. Rowe Price Group, Inc. is currently the company's largest shareholder with 12% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.6% and 4.3% of the stock.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 17 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 Descartes Systems Group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 information suggests that The Descartes Systems Group Inc insiders own under 1% of the company. Keep in mind that it's a big company, and the insiders own CA$25m worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 12% stake in the company, and hence can't easily be ignored. 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:

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.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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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