The big shareholder groups in Creo Medical Limited (LON:CREO) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Companies that have been privatized tend to have low insider ownership.
Creo Medical is not a large company by global standards. It has a market capitalization of UK£290m, which means it wouldn't have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. Let's take a closer look to see what the different types of shareholder can tell us about Creo Medical.
What Does The Institutional Ownership Tell Us About Creo Medical?
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 Creo Medical. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Creo Medical's historic earnings and revenue, below, but keep in mind there's always more to the story.
AIM:CREO Earnings and Revenue Growth August 12th 2020
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Creo Medical is not owned by hedge funds. The company's largest shareholder is Hargreave Hale Limited, Asset Management Arm, with ownership of 13%. Meanwhile, the second and third largest shareholders, hold 8.4% and 8.1%, of the shares outstanding, respectively.
On further inspection, we found that more than half the company's shares are owned by the top 8 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. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Creo Medical
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 Creo Medical Limited. It has a market capitalization of just UK£290m, and insiders have UK£10m worth of shares, in their own names. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public holds a 11% stake in CREO. 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 an ownership of 8.1%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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.
Public Company Ownership
Public companies currently own 3.0% of Creo Medical stock. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Creo Medical better, we need to consider many other factors. Be aware that Creo Medical is showing 4 warning signs in our investment analysis, and 2 of those are a bit unpleasant...
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.
