Do Insiders Own Lots Of Shares In Chembio Diagnostics, Inc. (NASDAQ:CEMI)?

A look at the shareholders of Chembio Diagnostics, Inc. (NASDAQ:CEMI) 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. 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.

With a market capitalization of US$101m, Chembio Diagnostics is a small cap stock, so it might not be well known by many institutional investors. In the chart below below, we can see that institutions are noticeable on the share registry. Let’s take a closer look to see what the different types of shareholder can tell us about CEMI.

Check out our latest analysis for Chembio Diagnostics

NasdaqCM:CEMI Ownership Summary, March 18th 2019
NasdaqCM:CEMI Ownership Summary, March 18th 2019

What Does The Institutional Ownership Tell Us About Chembio Diagnostics?

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.

As you can see, institutional investors own 44% of Chembio Diagnostics. 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 Chembio Diagnostics’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

NasdaqCM:CEMI Income Statement, March 18th 2019
NasdaqCM:CEMI Income Statement, March 18th 2019

Chembio Diagnostics is not owned by hedge funds. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Chembio Diagnostics

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.

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.

Our most recent data indicates that insiders own a reasonable proportion of Chembio Diagnostics, Inc.. It has a market capitalization of just US$101m, and insiders have US$12m worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public holds a 45% stake in CEMI. 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.

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 like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.

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.