eGuarantee, Inc.'s (TSE:8771) recent 11% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

• Significantly high institutional ownership implies eGuarantee's stock price is sensitive to their trading actions
• 54% of the business is held by the top 8 shareholders
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

A look at the shareholders of eGuarantee, Inc. (TSE:8771) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 45% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to JP¥63b last week after a 11% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 32% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell eGuarantee which might hurt individual investors.

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

See our latest analysis for eGuarantee

What Does The Institutional Ownership Tell Us About eGuarantee?

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 eGuarantee does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 eGuarantee's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in eGuarantee. ITOCHU Corporation is currently the company's largest shareholder with 13% of shares outstanding. With 7.8% and 6.5% of the shares outstanding respectively, Nomura Asset Management Co., Ltd. and Masanori Eto are the second and third largest shareholders. Masanori Eto, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

We also observed that the top 8 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of eGuarantee

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.

We can see that insiders own shares in eGuarantee, Inc.. As individuals, the insiders collectively own JP¥4.8b worth of the JP¥63b 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-- including retail investors -- own 21% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

It seems that Private Companies own 6.0%, of the eGuarantee stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Public Company Ownership

It appears to us that public companies own 16% of eGuarantee. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that eGuarantee is showing 1 warning sign in our investment analysis , 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.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com