Institutional investors may adopt severe steps after NV5 Global, Inc.'s (NASDAQ:NVEE) latest 4.9% drop adds to a year losses

By
Simply Wall St
Published
February 23, 2022
NasdaqCM:NVEE
Source: Shutterstock

To get a sense of who is truly in control of NV5 Global, Inc. (NASDAQ:NVEE), 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 66% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, institutional investors endured the highest losses last week after market cap fell by US$80m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 2.8% might not go down well especially with this category of shareholders. Often called “market makers”, 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 NV5 Global, which might have negative implications on individual investors.

Let's delve deeper into each type of owner of NV5 Global, beginning with the chart below.

See our latest analysis for NV5 Global

ownership-breakdown
NasdaqCM:NVEE Ownership Breakdown February 23rd 2022

What Does The Institutional Ownership Tell Us About NV5 Global?

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 NV5 Global. 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 NV5 Global's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NasdaqCM:NVEE Earnings and Revenue Growth February 23rd 2022

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in NV5 Global. The company's largest shareholder is BlackRock, Inc., with ownership of 13%. Dickerson Wright is the second largest shareholder owning 12% of common stock, and Vulcan Capital holds about 7.0% of the company stock. Dickerson Wright, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

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.

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

Insider Ownership Of NV5 Global

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that insiders maintain a significant holding in NV5 Global, Inc.. It has a market capitalization of just US$1.6b, and insiders have US$209m worth of shares in their own names. That's quite significant. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

With a 13% ownership, the general public, mostly comprising of individual investors, have some degree of sway over NV5 Global. 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.

Private Equity Ownership

With a stake of 7.0%, private equity firms could influence the NV5 Global board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand NV5 Global better, we need to consider many other factors. Take risks for example - NV5 Global has 2 warning signs we think you should be aware of.

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.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.