Recent uptick might appease Stepan Company (NYSE:SCL) institutional owners after losing 27% over the past year

Key Insights

• Given the large stake in the stock by institutions, Stepan's stock price might be vulnerable to their trading decisions
• A total of 7 investors have a majority stake in the company with 51% ownership
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

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If you want to know who really controls Stepan Company (NYSE:SCL), then you'll have to look at the makeup of its share registry. With 84% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors would probably welcome last week's 7.8% increase in the share price after a year of 27% losses as a sign that returns may to begin trending higher.

Let's take a closer look to see what the different types of shareholders can tell us about Stepan.

See our latest analysis for Stepan

What Does The Institutional Ownership Tell Us About Stepan?

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 Stepan 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. 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 Stepan's earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Stepan. BlackRock, Inc. is currently the largest shareholder, with 14% of shares outstanding. In comparison, the second and third largest shareholders hold about 11% and 6.7% of the stock.

We also observed that the top 7 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Stepan

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.

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.

We can report that insiders do own shares in Stepan Company. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$74m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 10% stake in Stepan. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Stepan (of which 1 doesn't sit too well with us!) you should know about.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.