Institutions' substantial holdings in Costain Group implies that they have significant influence over the company's share price
A total of 7 investors have a majority stake in the company with 50% ownership
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
To get a sense of who is truly in control of Costain Group PLC (LON:COST), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 61% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
Let's take a closer look to see what the different types of shareholders can tell us about Costain Group.
What Does The Institutional Ownership Tell Us About Costain Group?
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.
As you can see, institutional investors have a fair amount of stake in Costain Group. 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 Costain Group's historic earnings and revenue below, but keep in mind there's always more to the story.
LSE:COST Earnings and Revenue Growth April 5th 2023
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Costain Group. The company's largest shareholder is ASGC Construction LLC, with ownership of 15%. In comparison, the second and third largest shareholders hold about 8.3% and 8.0% of the stock.
On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of Costain Group
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. 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.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Our data suggests that insiders own under 1% of Costain Group PLC in their own names. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It appears that the board holds about UK£504k worth of stock. This compares to a market capitalization of UK£150m. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.
General Public Ownership
With a 18% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Costain Group. 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
With a stake of 5.6%, private equity firms could influence the Costain Group board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
Private Company Ownership
Our data indicates that Private Companies hold 15%, of the company's shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Costain Group better, we need to consider many other factors.
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.
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