Retail investors in Nanxing Machinery Co., Ltd. (SZSE:002757) are its biggest bettors, and their bets paid off as stock gained 10% last week

Key Insights

• Nanxing Machinery's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• 48% of the business is held by the top 25 shareholders
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

To get a sense of who is truly in control of Nanxing Machinery Co., Ltd. (SZSE:002757), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 52% to be precise, is retail investors. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, retail investors collectively scored the highest last week as the company hit CN¥3.7b market cap following a 10% gain in the stock.

In the chart below, we zoom in on the different ownership groups of Nanxing Machinery.

View our latest analysis for Nanxing Machinery

What Does The Institutional Ownership Tell Us About Nanxing Machinery?

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.

Less than 5% of Nanxing Machinery is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. So if the company itself can improve over time, we may well see more institutional buyers in the future. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

Nanxing Machinery is not owned by hedge funds. The company's largest shareholder is Dongguan Nanxing Industrial Investment Co., Ltd., with ownership of 38%. Meanwhile, the second and third largest shareholders, hold 3.8% and 3.1%, of the shares outstanding, respectively. Note that the second and third-largest shareholders are also Chief Executive Officer and Chairman of the Board, respectively, meaning that the company's top shareholders are insiders.

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 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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Nanxing Machinery

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.

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.

We can report that insiders do own shares in Nanxing Machinery Co., Ltd.. As individuals, the insiders collectively own CN¥265m worth of the CN¥3.7b company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 52% of Nanxing Machinery shares. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

It seems that Private Companies own 38%, of the Nanxing Machinery stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Nanxing Machinery better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Nanxing Machinery , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.