Given the large stake in the stock by institutions, Ennis' stock price might be vulnerable to their trading decisions
A total of 10 investors have a majority stake in the company with 51% ownership
Using data from company's past performance alongside ownership research, one can better assess the future performance of a company
To get a sense of who is truly in control of Ennis, Inc. (NYSE:EBF), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 70% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.
In the chart below, we zoom in on the different ownership groups of Ennis.
What Does The Institutional Ownership Tell Us About Ennis?
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.
We can see that Ennis does have institutional investors; and they hold a good portion of the company's stock. 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 Ennis' historic earnings and revenue below, but keep in mind there's always more to the story.
NYSE:EBF Earnings and Revenue Growth November 4th 2024
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Our data indicates that hedge funds own 5.9% of Ennis. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. The company's largest shareholder is Dimensional Fund Advisors LP, with ownership of 8.1%. In comparison, the second and third largest shareholders hold about 8.1% and 6.9% of the stock. In addition, we found that Keith Walters, the CEO has 2.2% of the shares allocated to their name.
On further inspection, we found that more than half the company's shares are owned by the top 10 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.
Insider Ownership Of Ennis
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.
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 Ennis, Inc.. As individuals, the insiders collectively own US$20m worth of the US$526m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, who are usually individual investors, hold a 20% stake in Ennis. 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.
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.
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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.
