Are Institutions Heavily Invested In Magal Security Systems Ltd.'s (NASDAQ:MAGS) Shares?

By
Simply Wall St
Published
March 20, 2021
NasdaqGM:MAGS

Every investor in Magal Security Systems Ltd. (NASDAQ:MAGS) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. We also tend to see lower insider ownership in companies that were previously publicly owned.

With a market capitalization of US$107m, Magal Security Systems is a small cap stock, so it might not be well known by many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Magal Security Systems.

Check out our latest analysis for Magal Security Systems

ownership-breakdown
NasdaqGM:MAGS Ownership Breakdown March 21st 2021

What Does The Institutional Ownership Tell Us About Magal Security Systems?

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.

Magal Security Systems already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Magal Security Systems, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NasdaqGM:MAGS Earnings and Revenue Growth March 21st 2021

Magal Security Systems is not owned by hedge funds. Our data shows that First Israel Mezzanine Investors Ltd. is the largest shareholder with 43% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 4.9% and 3.3%, of the shares outstanding, respectively.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Magal Security Systems

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 data suggests that insiders own under 1% of Magal Security Systems Ltd. in their own names. It appears that the board holds about US$64k worth of stock. This compares to a market capitalization of US$107m. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

The general public, with a 39% stake in the company, will not easily be ignored. 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

Private equity firms hold a 43% stake in Magal Security Systems. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Magal Security Systems , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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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