Stock Analysis

First Financial Northwest, Inc.'s (NASDAQ:FFNW) market cap dropped US$21m last week; individual investors who hold 37% were hit as were institutions

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Key Insights

  • Significant control over First Financial Northwest by retail investors implies that the general public has more power to influence management and governance-related decisions
  • The top 10 shareholders own 51% of the company
  • Institutions own 35% of First Financial Northwest

A look at the shareholders of First Financial Northwest, Inc. (NASDAQ:FFNW) can tell us which group is most powerful. We can see that retail investors own the lion's share in the company with 37% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 15% decrease in the stock price last week, retail investors suffered the most losses, but institutions who own 35% stock also took a hit.

In the chart below, we zoom in on the different ownership groups of First Financial Northwest.

See our latest analysis for First Financial Northwest

NasdaqGS:FFNW Ownership Breakdown March 14th 2023

What Does The Institutional Ownership Tell Us About First Financial Northwest?

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.

First Financial Northwest 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at First Financial Northwest's earnings history below. Of course, the future is what really matters.

NasdaqGS:FFNW Earnings and Revenue Growth March 14th 2023

It looks like hedge funds own 5.9% of First Financial Northwest shares. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Our data shows that First Financial Northwest Foundation, Endowment Arm is the largest shareholder with 9.7% of shares outstanding. With 9.0% and 8.7% of the shares outstanding respectively, First Financial Northwest, Inc., ESOP and Dimensional Fund Advisors LP are the second and third largest shareholders.

We also observed that the top 10 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of First Financial Northwest

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.

Our most recent data indicates that insiders own some shares in First Financial Northwest, Inc.. As individuals, the insiders collectively own US$4.4m worth of the US$116m company. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 37% ownership, the general public, mostly comprising of individual investors, have some degree of sway over First Financial Northwest. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for First Financial Northwest you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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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