In this article, I’m going to take a look at TruScreen Limited’s (NZSE:TRU) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. The impact of a company’s ownership structure affects both its short- and long-term performance. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, which is why we’ll take a moment to analyse TRU’s shareholder registry.

View our latest analysis for TruScreen

Institutional Ownership

Institutional investors are one of the largest group of market participants and their buy-sell decisions on a company’s stock can significantly impact prices, more so, when there are relatively small amounts of shares available on the market to trade. A low institutional ownership of 1.38% puts TRU on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading.

Insider Ownership

I find insiders are another important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. TRU insiders hold a significant stake of 51.09% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). It’s also interesting to learn what TRU insiders have been doing with their shareholdings lately. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.

General Public Ownership

The general public holds a substantial 27.67% stake in TRU, making it a highly popular stock among retail investors. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.

Private Company Ownership

Another important group of owners for potential investors in TRU are private companies that hold a stake of 19.60% in TRU. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect TRU’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.

Next Steps:

With a low level of institutional ownership, investors in TRU need not worry about non-fundamental factors such as ownership structure causing large impact on stock prices. However, ownership structure should not be the only focus of your research when constructing an investment thesis around TRU. Rather, you should be examining fundamental factors such as TruScreen’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:

• 1. Financial Health: Is TRU’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.

• 2. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.