Stock Analysis

Do Directors Own Petrofac Limited (LON:PFC) Shares?

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LSE:PFC
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If you want to know who really controls Petrofac Limited (LON:PFC), then you'll have to look at the makeup of its share registry. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Warren Buffett said that he likes 'a business with enduring competitive advantages that is run by able and owner-oriented people'. So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

Petrofac has a market capitalization of UK£1.3b, so we would expect some institutional investors to have noticed the stock. In the chart 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 Petrofac.

Check out our latest analysis for Petrofac

LSE:PFC Ownership Summary, January 22nd 2020
LSE:PFC Ownership Summary, January 22nd 2020

What Does The Institutional Ownership Tell Us About Petrofac?

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.

We can see that Petrofac does have institutional investors; and they hold 22% of the 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 Petrofac, (below). Of course, keep in mind that there are other factors to consider, too.

LSE:PFC Income Statement, January 22nd 2020
LSE:PFC Income Statement, January 22nd 2020

It would appear that 6.7% of Petrofac shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. With a 19% stake, CEO Ayman Asfari is the largest shareholder. With 6.7% and 3.9% of the shares outstanding respectively, Toscafund Asset Management LLP and Caisse de dépôt et placement du Québec are the second and third largest shareholders.

Additionally, we found that the top 12 have the combined ownership of 51% in the company, suggesting that no one share holder has significant control over the company.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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 Petrofac

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.

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 most recent data indicates that insiders own a reasonable proportion of Petrofac Limited. It is very interesting to see that insiders have a meaningful UK£245m stake in this UK£1.3b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public holds a 49% stake in PFC. 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 Petrofac better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Petrofac you should know about.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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.

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. Thank you for reading.

About LSE:PFC

Petrofac

Petrofac Limited designs, builds, manages, and maintains infrastructure for the energy industries in the United Kingdom, Algeria, Thailand, Oman, Kuwait, Iraq, the United Arab Emirates, the Netherlands, and internationally.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation5
Future Growth5
Past Performance0
Financial Health4
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Undervalued with high growth potential.