In this article, I’m going to take a look at Co-Diagnostics Inc’s (NASDAQ:CODX) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. The impact of a company’s ownership structure affects both its short- and long-term performance. The same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, which is a decisive factor for a long-term investor. It also impacts the trading environment of company shares, which is more of a concern for short-term investors. Therefore, it is beneficial for us to examine CODX’s ownership structure in more detail.Check out our latest analysis for Co-Diagnostics
Institutional OwnershipDue to the big order sizes of institutional investors, a company’s shares can experience large, one-sided momentum, driven by high volume of shares removed from, or injected into, the market. A low institutional ownership of 1.45% puts CODX on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading.
Insider OwnershipAn important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. CODX insiders hold a significant stake of 18.95% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). It may be interesting to take a look at what company insiders have been doing with their holdings lately. Insider buying may be a sign of upbeat future expectations, however, selling doesn’t necessarily mean the opposite as insiders may be motivated by their personal financial needs.
General Public OwnershipA substantial ownership of 52.64% in CODX is held by the general public. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses.
Private Equity OwnershipPrivate equity firms hold a 10.55% stake in CODX. With a stake of this size, they can be influential in key policy decisions. This is a positive sign for potential investors as these firms play an important role in aligning company policy with shareholder returns.
Private Company OwnershipAnother group of owners that a potential investor in CODX should consider are private companies, with a stake of 16.41%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. An ownership of this size indicates a strong financial backing and has the potential to influence CODX’s business strategy. Thus, investors should dig deeper into CODX’s business relations with these companies and how it can affect shareholder returns in the long-term.
With a low level of institutional ownership, investors in CODX need not worry about non-fundamental factors such as ownership structure causing large impact on stock prices. However, if you are building an investment case for CODX, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of Co-Diagnostics’s share price. I urge you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for CODX’s future growth? Take a look at our free research report of analyst consensus for CODX’s outlook.
- Financial Health: Is CODX’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.