Is Scales Corporation Limited (NZSE:SCL) Popular Amongst Institutions?

Every investor in Scales Corporation Limited (NZSE:SCL) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. Companies that have been privatized tend to have low insider ownership.

Scales is not a large company by global standards. It has a market capitalization of NZ$665m, which means it wouldn’t have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about Scales.

Check out our latest analysis for Scales

ownership-breakdown
NZSE:SCL Ownership Breakdown September 21st 2020

What Does The Institutional Ownership Tell Us About Scales?

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.

As you can see, institutional investors have a fair amount of stake in Scales. 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. 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 Scales, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NZSE:SCL Earnings and Revenue Growth September 21st 2020

Hedge funds don’t have many shares in Scales. China Resources (Holdings) Co., Ltd. is currently the company’s largest shareholder with 15% of shares outstanding. With 7.6% and 2.4% of the shares outstanding respectively, Harbour Asset Management Limited and BT Funds Management (NZ) Limited are the second and third largest shareholders. Furthermore, CEO Andrew Borland is the owner of 0.7% of the company’s shares.

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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Scales

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own some shares in Scales Corporation Limited. In their own names, insiders own NZ$29m worth of stock in the NZ$665m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public — mostly retail investors — own 54% of Scales. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Company Ownership

We can see that Private Companies own 15%, of the shares on issue. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we’ve discovered 2 warning signs for Scales that you should be aware of before investing here.

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.

Promoted
When trading Scales or any other investment, use the platform considered by many to be the Professional’s Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.


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. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


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