Stock Analysis

What Type Of Shareholders Own The Most Number of The Eastern Company (NASDAQ:EML) Shares?

NasdaqGM:EML
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A look at the shareholders of The Eastern Company (NASDAQ:EML) can tell us which group is most powerful. 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 US$139m, Eastern is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about Eastern.

See our latest analysis for Eastern

ownership-breakdown
NasdaqGM:EML Ownership Breakdown December 6th 2020

What Does The Institutional Ownership Tell Us About Eastern?

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.

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

earnings-and-revenue-growth
NasdaqGM:EML Earnings and Revenue Growth December 6th 2020

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Our data indicates that hedge funds own 9.3% of Eastern. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Our data shows that GAMCO Investors, Inc. is the largest shareholder with 13% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.3% and 6.6%, of the shares outstanding, respectively.

On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Eastern

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

We can see that insiders own shares in The Eastern Company. In their own names, insiders own US$6.4m worth of stock in the US$139m company. This shows at least some alignment, but I usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public holds a 30% stake in Eastern. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Eastern better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Eastern , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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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