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Could Provident Financial Holdings, Inc.’s (NASDAQ:PROV) Investor Composition Influence The Stock Price?

Simply Wall St

Every investor in Provident Financial Holdings, Inc. (NASDAQ:PROV) should be aware of the most powerful shareholder groups. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Warren Buffett said that he likes ‘a business with enduring competitive advantages that is run by able and owner-oriented people’. So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.

Provident Financial Holdings is a smaller company with a market capitalization of US$151m, so it may still be flying under the radar of many institutional investors. In the chart below below, we can see 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 PROV.

See our latest analysis for Provident Financial Holdings

NasdaqGS:PROV Ownership Summary, February 28th 2019

What Does The Institutional Ownership Tell Us About Provident Financial Holdings?

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.

As you can see, institutional investors own 63% of Provident Financial Holdings. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It’s therefore worth looking at Provident Financial Holdings’s earnings history, below. Of course, the future is what really matters.

NasdaqGS:PROV Income Statement, February 28th 2019

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 Provident Financial Holdings. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Provident Financial Holdings

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 Provident Financial Holdings, Inc.. In their own names, insiders own US$15m worth of stock in the US$151m company. Some would say this shows alignment of interests between shareholders and the board, though I generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 21% ownership, the general public have some degree of sway over PROV. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand Provident Financial Holdings better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free .

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.