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Could FreightCar America, Inc.'s (NASDAQ:RAIL) Investor Composition Influence The Stock Price?

Simply Wall St

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The big shareholder groups in FreightCar America, Inc. (NASDAQ:RAIL) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. We also tend to see lower insider ownership in companies that were previously publicly owned.

FreightCar America is a smaller company with a market capitalization of US$76m, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it's seems that institutions own shares in the company. Let's take a closer look to see what the different types of shareholder can tell us about RAIL.

See our latest analysis for FreightCar America

NasdaqGS:RAIL Ownership Summary, June 25th 2019

What Does The Institutional Ownership Tell Us About FreightCar America?

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.

FreightCar America already has institutions on the share registry. Indeed, they own 86% of the company. 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 FreightCar America's historic earnings and revenue, below, but keep in mind there's always more to the story.

NasdaqGS:RAIL Income Statement, June 25th 2019

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. FreightCar America is not owned by hedge funds. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of FreightCar America

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Shareholders would probably be interested to learn that insiders own shares in FreightCar America, Inc.. In their own names, insiders own US$2.8m worth of stock in the US$76m company. This shows at least some alignment, but I usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public holds a 10% stake in RAIL. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand FreightCar America better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.