Could Quarterhill Inc.'s (TSE:QTRH) Investor Composition Influence The Stock Price?

By
Simply Wall St
Published
September 26, 2019
TSX:QTRH
Source: Shutterstock

Every investor in Quarterhill Inc. (TSE:QTRH) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Companies that have been privatized tend to have low insider ownership.

With a market capitalization of CA$210m, Quarterhill is a small cap stock, so it might not be well known by many institutional investors. In the chart below below, we can see that institutions own shares in the company. Let's take a closer look to see what the different types of shareholder can tell us about QTRH.

View our latest analysis for Quarterhill

TSX:QTRH Ownership Summary, September 27th 2019
TSX:QTRH Ownership Summary, September 27th 2019

What Does The Institutional Ownership Tell Us About Quarterhill?

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.

As you can see, institutional investors own 24% of Quarterhill. This suggests some credibility amongst professional investors. But we can't rely on that fact alone, since institutions make bad investments sometimes, just like everyone does. 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 Quarterhill's historic earnings and revenue, below, but keep in mind there's always more to the story.

TSX:QTRH Income Statement, September 27th 2019
TSX:QTRH Income Statement, September 27th 2019

Quarterhill is not owned by hedge funds. 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 Quarterhill

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 data suggests that insiders own under 1% of Quarterhill Inc. in their own names. It appears that the board holds about CA$2.0m worth of stock. This compares to a market capitalization of CA$210m. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are mostly retail investors, collectively hold 75% of Quarterhill shares. This size of ownership gives retail investors collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Quarterhill better, we need to consider many other factors.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

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