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Is Austal Limited (ASX:ASB) Popular Amongst Institutions?

Simply Wall St
·5 mins read

The big shareholder groups in Austal Limited (ASX:ASB) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Companies that used to be publicly owned tend to have lower insider ownership.

Austal isn't enormous, but it's not particularly small either. It has a market capitalization of AU$1.2b, which means it would generally expect to see some institutions on the share registry. Taking a look at our data on the ownership groups (below), it seems that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about Austal.

View our latest analysis for Austal

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Austal?

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.

As you can see, institutional investors have a fair amount of stake in Austal. 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 Austal's historic earnings and revenue below, but keep in mind there's always more to the story.

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

We note that hedge funds don't have a meaningful investment in Austal. Looking at our data, we can see that the largest shareholder is enX Group Limited with 9.0% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.1% and 4.9%, of the shares outstanding, respectively. In addition, we found that David Patrick Singleton, the CEO has 0.7% of the shares allocated to his name

After doing some more digging, we found that the top 18 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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 Austal

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.

I can report that insiders do own shares in Austal Limited. In their own names, insiders own AU$27m worth of stock in the AU$1.2b 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

With a 42% ownership, the general public have some degree of sway over Austal. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Public Company Ownership

We can see that public companies hold 9.2% of the Austal shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for Austal (1 is potentially serious) 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.

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.

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