Hunan Er-Kang Pharmaceutical Co., Ltd (SZSE:300267) insiders, who hold 45% of the firm would be disappointed by the recent pullback

Key Insights

• Significant insider control over Hunan Er-Kang Pharmaceutical implies vested interests in company growth
• The top 3 shareholders own 50% of the company
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

To get a sense of who is truly in control of Hunan Er-Kang Pharmaceutical Co., Ltd (SZSE:300267), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual insiders with 45% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to CN¥6.7b last week, insiders would have faced the highest losses than any other shareholder groups of the company.

Let's delve deeper into each type of owner of Hunan Er-Kang Pharmaceutical, beginning with the chart below.

See our latest analysis for Hunan Er-Kang Pharmaceutical

What Does The Institutional Ownership Tell Us About Hunan Er-Kang Pharmaceutical?

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.

Since institutions own only a small portion of Hunan Er-Kang Pharmaceutical, many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. If the company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. It is not uncommon to see a big share price rise if multiple institutional investors are trying to buy into a stock at the same time. So check out the historic earnings trajectory, below, but keep in mind it's the future that counts most.

We note that hedge funds don't have a meaningful investment in Hunan Er-Kang Pharmaceutical. Our data shows that Fangwen Shuai is the largest shareholder with 41% of shares outstanding. With 6.4% and 2.5% of the shares outstanding respectively, Hunan Shuaijia Investment Co., Ltd. and Xingni Peng are the second and third largest shareholders.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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 Hunan Er-Kang Pharmaceutical

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.

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 insiders maintain a significant holding in Hunan Er-Kang Pharmaceutical Co., Ltd. Insiders own CN¥3.0b worth of shares in the CN¥6.7b company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 44% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hunan Er-Kang Pharmaceutical. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

It seems that Private Companies own 8.7%, of the Hunan Er-Kang Pharmaceutical 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:

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 1 warning sign for Hunan Er-Kang Pharmaceutical you should be aware of.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.