Could The Vital Farms, Inc. (NASDAQ:VITL) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
November 03, 2020
NasdaqGM:VITL

The big shareholder groups in Vital Farms, Inc. (NASDAQ:VITL) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

Vital Farms has a market capitalization of US$1.4b, so we would expect some institutional investors to have noticed the stock. In the chart below, we can see that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about Vital Farms.

See our latest analysis for Vital Farms

ownership-breakdown
NasdaqGM:VITL Ownership Breakdown November 3rd 2020

What Does The Institutional Ownership Tell Us About Vital Farms?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Vital Farms does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Vital Farms' earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NasdaqGM:VITL Earnings and Revenue Growth November 3rd 2020

Vital Farms is not owned by hedge funds. From our data, we infer that the largest shareholder is Matthew O'Hayer (who also holds the title of Top Key Executive) with 27% of shares outstanding. Its usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we're glad to see a company insider play the role of a key stakeholder. In comparison, the second and third largest shareholders hold about 7.5% and 7.4% of the stock.

On looking further, we found that 55% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Vital Farms

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.

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.

It seems insiders own a significant proportion of Vital Farms, Inc.. It is very interesting to see that insiders have a meaningful US$557m stake in this US$1.4b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public holds a 26% stake in Vital Farms. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With a stake of 17%, private equity firms could influence the Vital Farms board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Public Company Ownership

It appears to us that public companies own 7.5% of Vital Farms. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Vital Farms better, we need to consider many other factors. For instance, we've identified 1 warning sign for Vital Farms that 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.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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