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Institutional owners may consider drastic measures as Encavis AG's (ETR:ECV) recent €95m drop adds to long-term losses

Key Insights

  • Given the large stake in the stock by institutions, Encavis' stock price might be vulnerable to their trading decisions

  • The top 10 shareholders own 52% of the company

  • Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

Every investor in Encavis AG (ETR:ECV) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 50% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 4.8% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 34% might not go down well especially with this category of shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Encavis' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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Let's take a closer look to see what the different types of shareholders can tell us about Encavis.

Check out our latest analysis for Encavis

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Encavis?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Encavis already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Encavis, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
earnings-and-revenue-growth

Hedge funds don't have many shares in Encavis. Looking at our data, we can see that the largest shareholder is Dr. Liedtke VermÖGensverwaltung Gmbh with 23% of shares outstanding. In comparison, the second and third largest shareholders hold about 4.3% and 3.6% of the stock.

We did some more digging and found that 10 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 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 Encavis

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

We note our data does not show any board members holding shares, personally. It is unusual not to have at least some personal holdings by board members, so our data might be flawed. A good next step would be to check how much the CEO is paid.

General Public Ownership

With a 22% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Encavis. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 29%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 3 warning signs for Encavis (1 shouldn't be ignored) that you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.