Could The Commercial Metals Company (NYSE:CMC) Ownership Structure Tell Us Something Useful?

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Simply Wall St

Sat, Jan 2, 2021, 12:06 AM 4 min read

If you want to know who really controls Commercial Metals Company (NYSE:CMC), then you'll have to look at the makeup of its share registry. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Companies that have been privatized tend to have low insider ownership.

With a market capitalization of US$2.5b, Commercial Metals is a decent size, so it is probably on the radar of institutional investors. In the chart below, we can see that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about Commercial Metals.

See our latest analysis for Commercial Metals

ownership-breakdown — NYSE:CMC Ownership Breakdown January 2nd 2021

What Does The Institutional Ownership Tell Us About Commercial Metals?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Commercial Metals. 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 Commercial Metals, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth — NYSE:CMC Earnings and Revenue Growth January 2nd 2021

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Commercial Metals. The company's largest shareholder is BlackRock, Inc., with ownership of 11%. For context, the second largest shareholder holds about 9.8% of the shares outstanding, followed by an ownership of 8.2% by the third-largest shareholder. Furthermore, CEO Barbara Smith is the owner of 0.5% of the company's shares.

We did some more digging and found that 10 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Commercial Metals

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.

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 can see that insiders own shares in Commercial Metals Company. This is a big company, so it is good to see this level of alignment. Insiders own US$31m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 11% ownership, the general public have some degree of sway over Commercial Metals. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Commercial Metals is showing 3 warning signs in our investment analysis , and 1 of those is potentially serious...

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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.

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