Stock Analysis

Institutional owners may take dramatic actions as Eagle Bancorp, Inc.'s (NASDAQ:EGBN) recent 7.4% drop adds to one-year losses

NasdaqCM:EGBN
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Key Insights

  • Significantly high institutional ownership implies Eagle Bancorp's stock price is sensitive to their trading actions
  • A total of 14 investors have a majority stake in the company with 50% ownership
  • Insiders have been buying lately

A look at the shareholders of Eagle Bancorp, Inc. (NASDAQ:EGBN) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 76% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors endured the highest losses after the company's share price fell by 7.4% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 45% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell Eagle Bancorp, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of Eagle Bancorp.

See our latest analysis for Eagle Bancorp

ownership-breakdown
NasdaqCM:EGBN Ownership Breakdown August 15th 2023

What Does The Institutional Ownership Tell Us About Eagle Bancorp?

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.

Eagle Bancorp already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Eagle Bancorp's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NasdaqCM:EGBN Earnings and Revenue Growth August 15th 2023

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Eagle Bancorp. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 15% of shares outstanding. For context, the second largest shareholder holds about 13% of the shares outstanding, followed by an ownership of 4.9% by the third-largest shareholder. In addition, we found that Susan Riel, the CEO has 1.0% of the shares allocated to their name.

A closer look at our ownership figures suggests that the top 14 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Eagle Bancorp

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

Shareholders would probably be interested to learn that insiders own shares in Eagle Bancorp, Inc.. In their own names, insiders own US$22m worth of stock in the US$779m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 21% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Eagle Bancorp better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Eagle Bancorp (of which 1 is a bit unpleasant!) you should know about.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Eagle Bancorp 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.

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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.