Every investor in EML Payments Limited (ASX:EML) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.
EML Payments is not a large company by global standards. It has a market capitalization of AU$1.1b, which means it wouldn't have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about EML Payments.
What Does The Institutional Ownership Tell Us About EML Payments?
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.
EML Payments 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 EML Payments, (below). Of course, keep in mind that there are other factors to consider, too.
ASX:EML Earnings and Revenue Growth August 13th 2020
We note that hedge funds don't have a meaningful investment in EML Payments. Challenger Limited is currently the largest shareholder, with 6.3% of shares outstanding. Greencape Capital Pty Ltd is the second largest shareholder owning 6.3% of common stock, and Colonial First State Investments Limited holds about 4.9% of the company stock. Additionally, the company's CEO Thomas Cregan directly holds 0.029635099999999998 of the total shares outstanding.
After doing some more digging, we found that the top 23 have the combined ownership of 50% in the company, suggesting that no one share holder has significant control over the company.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of EML Payments
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.
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.
We can see that insiders own shares in EML Payments Limited. As individuals, the insiders collectively own AU$95m worth of the AU$1.1b company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public holds a 48% stake in EML. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Private Company Ownership
Our data indicates that Private Companies hold 4.7%, 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:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 4 warning signs for EML Payments you should be aware of.
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.
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.
