Stock Analysis

Recent uptick might appease Sturm, Ruger & Company, Inc. (NYSE:RGR) institutional owners after losing 12% over the past year

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NYSE:RGR
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If you want to know who really controls Sturm, Ruger & Company, Inc. (NYSE:RGR), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 65% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

After a year of 12% losses, last week’s 11% gain would be welcomed by institutional investors as a likely sign that returns might start trending higher.

In the chart below, we zoom in on the different ownership groups of Sturm Ruger.

Our analysis indicates that RGR is potentially undervalued!

ownership-breakdown
NYSE:RGR Ownership Breakdown December 2nd 2022

What Does The Institutional Ownership Tell Us About Sturm Ruger?

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.

We can see that Sturm Ruger does have institutional investors; and they hold a good portion of the company's stock. 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 Sturm Ruger's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NYSE:RGR Earnings and Revenue Growth December 2nd 2022

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It would appear that 5.6% of Sturm Ruger shares are controlled by hedge funds. 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 BlackRock, Inc. is the largest shareholder with 16% of shares outstanding. In comparison, the second and third largest shareholders hold about 11% and 5.6% of the stock. Additionally, the company's CEO Christopher Killoy directly holds 0.9% of the total shares outstanding.

A closer look at our ownership figures suggests that the top 13 shareholders have a combined ownership of 51% 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. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Sturm Ruger

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. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

We can see that insiders own shares in Sturm, Ruger & Company, Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$24m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 28% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Sturm Ruger. 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. For example, we've discovered 1 warning sign for Sturm Ruger that you should be aware of before investing here.

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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