Stock Analysis

Institutional investors control 75% of Super Micro Computer, Inc. (NASDAQ:SMCI) and were rewarded last week after stock increased 11%

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NasdaqGS:SMCI
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Every investor in Super Micro Computer, Inc. (NASDAQ:SMCI) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 75% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And things are looking up for institutional investors after the company gained US$479m in market cap last week. One-year return to shareholders is currently 117% and last week’s gain was the icing on the cake.

Let's delve deeper into each type of owner of Super Micro Computer, beginning with the chart below.

Our analysis indicates that SMCI is potentially undervalued!

ownership-breakdown
NasdaqGS:SMCI Ownership Breakdown November 24th 2022

What Does The Institutional Ownership Tell Us About Super Micro Computer?

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 Super Micro Computer 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. 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 Super Micro Computer's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NasdaqGS:SMCI Earnings and Revenue Growth November 24th 2022

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Super Micro Computer is not owned by hedge funds. The company's CEO Charles Liang is the largest shareholder with 10% of shares outstanding. For context, the second largest shareholder holds about 9.1% of the shares outstanding, followed by an ownership of 8.6% by the third-largest shareholder.

We also observed that the top 10 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.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Super Micro Computer

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

It seems insiders own a significant proportion of Super Micro Computer, Inc.. Insiders own US$620m worth of shares in the US$4.8b company. That's quite meaningful. 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, who are usually individual investors, hold a 12% stake in Super Micro Computer. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Super Micro Computer (of which 2 are concerning!) you should know about.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

Valuation is complex, but we're helping make it simple.

Find out whether Super Micro Computer is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About NasdaqGS:SMCI

Super Micro Computer

Super Micro Computer, Inc., together with its subsidiaries, develops and manufactures high-performance server and storage solutions based on modular and open architecture.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation3
Future Growth1
Past Performance5
Financial Health5
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Solid track record with excellent balance sheet.