Could The EDP - Energias de Portugal, S.A. (ELI:EDP) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
February 07, 2022
ENXTLS:EDP
Source: Shutterstock

The big shareholder groups in EDP - Energias de Portugal, S.A. (ELI:EDP) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. We also tend to see lower insider ownership in companies that were previously publicly owned.

With a market capitalization of €17b, EDP - Energias de Portugal is rather large. We'd expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about EDP - Energias de Portugal.

See our latest analysis for EDP - Energias de Portugal

ownership-breakdown
ENXTLS:EDP Ownership Breakdown February 7th 2022

What Does The Institutional Ownership Tell Us About EDP - Energias de Portugal?

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 EDP - Energias de Portugal 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. 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 EDP - Energias de Portugal, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
ENXTLS:EDP Earnings and Revenue Growth February 7th 2022

Hedge funds don't have many shares in EDP - Energias de Portugal. Our data shows that China Three Gorges Corporation is the largest shareholder with 19% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.0% and 7.2% of the stock.

We did some more digging and found that 9 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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

Insider Ownership Of EDP - Energias de Portugal

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 less than 1% of EDP - Energias de Portugal, S.A.. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own €2.7m of stock. 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 25% stake in EDP - Energias de Portugal. 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

We can see that Private Companies own 29%, 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with EDP - Energias de Portugal , and understanding them should be part of your investment process.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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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