Could The The L.S. Starrett Company (NYSE:SCX) Ownership Structure Tell Us Something Useful?

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The big shareholder groups in The L.S. Starrett Company (NYSE:SCX) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. We also tend to see lower insider ownership in companies that were previously publicly owned.

With a market capitalization of US$45m, L.S. Starrett 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 own shares in the company. Let’s take a closer look to see what the different types of shareholder can tell us about SCX.

Check out our latest analysis for L.S. Starrett

NYSE:SCX Ownership Summary, July 15th 2019
NYSE:SCX Ownership Summary, July 15th 2019

What Does The Institutional Ownership Tell Us About L.S. Starrett?

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 L.S. Starrett does have institutional investors; and they hold 42% of the stock. 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 L.S. Starrett, (below). Of course, keep in mind that there are other factors to consider, too.

NYSE:SCX Income Statement, July 15th 2019
NYSE:SCX Income Statement, July 15th 2019

It looks like hedge funds own 6.0% of L.S. Starrett shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Our information suggests that there isn’t any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of L.S. Starrett

The definition of company insiders can be subjective, and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

I can report that insiders do own shares in The L.S. Starrett Company. As individuals, the insiders collectively own US$908k worth of the US$45m 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, with a 42% stake in the company, will not easily be ignored. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.