Compass Group PLC's (LON:CPG) recent 7.4% pullback adds to one-year year losses, institutional owners may take drastic measures

By
Simply Wall St
Published
May 10, 2022
LSE:CPG
Source: Shutterstock

If you want to know who really controls Compass Group PLC (LON:CPG), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 88% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 7.4% last week. The recent loss, which adds to a one-year loss of 0.7% for stockholders, may not sit well with this group of investors. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell Compass Group which might hurt individual investors.

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

See our latest analysis for Compass Group

ownership-breakdown
LSE:CPG Ownership Breakdown May 10th 2022

What Does The Institutional Ownership Tell Us About Compass Group?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that Compass Group does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Compass Group, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
LSE:CPG Earnings and Revenue Growth May 10th 2022

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Compass Group is not owned by hedge funds. BlackRock, Inc. is currently the largest shareholder, with 7.7% of shares outstanding. In comparison, the second and third largest shareholders hold about 6.1% and 4.2% of the stock.

A closer look at our ownership figures suggests that the top 25 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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 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 Compass Group

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. 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.

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.

Our data suggests that insiders own under 1% of Compass Group PLC in their own names. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own UK£13m worth of shares. Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 12% stake in Compass Group. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Compass Group better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Compass Group .

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.