Yahoo Finance Both individual investors who control a good portion of carsales.com Ltd (ASX:CAR) along with institutions must be dismayed after last week's 4.4% decrease
Every investor in carsales.com Ltd (ASX:CAR) should be aware of the most powerful shareholder groups. With 58% stake, individual investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
While institutions, who own 37% shares weren’t spared from last week’s AU$329m market cap drop, individual investors as a group suffered the maximum losses
In the chart below, we zoom in on the different ownership groups of carsales.com.
View our latest analysis for carsales.com
What Does The Institutional Ownership Tell Us About carsales.com?
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.
carsales.com 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. 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 carsales.com's historic earnings and revenue below, but keep in mind there's always more to the story.
Hedge funds don't have many shares in carsales.com. Bennelong Funds Management Ltd. is currently the company's largest shareholder with 8.1% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.0% and 4.7%, of the shares outstanding, respectively.
A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of carsales.com
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.
Shareholders would probably be interested to learn that insiders own shares in carsales.com Ltd. The insiders have a meaningful stake worth AU$363m. Most would see this as a real positive. If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.
General Public Ownership
The general public, mostly comprising of individual investors, collectively holds 58% of carsales.com shares. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.
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 2 warning signs for carsales.com 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.
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