- Significantly high institutional ownership implies Essity's stock price is sensitive to their trading actions
- The top 18 shareholders own 51% of the company
- Recent purchases by insiders
To get a sense of who is truly in control of Essity AB (publ) (STO:ESSITY B), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 68% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 3.9% in value last week. Still, the 9.2% one-year gains may have helped mitigate their overall losses. They should, however, be mindful of further losses in the future.
Let's delve deeper into each type of owner of Essity, beginning with the chart below.
What Does The Institutional Ownership Tell Us About Essity?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
We can see that Essity does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Essity's historic earnings and revenue below, but keep in mind there's always more to the story.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Essity. Looking at our data, we can see that the largest shareholder is AB Industrivärden (publ) with 10% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.9% and 5.0% of the stock.
Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 18 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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 Essity
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.
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 information suggests that Essity AB (publ) insiders own under 1% of the company. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own kr82m of stock. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
With a 32% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Essity. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
It's always worth thinking about the different groups who own shares in a company. But to understand Essity better, we need to consider many other factors. For instance, we've identified 2 warning signs for Essity (1 is concerning) that you should be aware of.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
Valuation is complex, but we're helping make it simple.
Find out whether Essity is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.