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Could The Sterling Construction Company, Inc. (NASDAQ:STRL) Ownership Structure Tell Us Something Useful?

Simply Wall St

If you want to know who really controls Sterling Construction Company, Inc. (NASDAQ:STRL), then you'll have to look at the makeup of its share registry. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.'

Sterling Construction Company is not a large company by global standards. It has a market capitalization of US$337m, which means it wouldn't have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about STRL.

View our latest analysis for Sterling Construction Company

NasdaqGS:STRL Ownership Summary, April 11th 2019

What Does The Institutional Ownership Tell Us About Sterling Construction Company?

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 Sterling Construction Company does have institutional investors; and they hold 76% of the stock. 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. 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 Sterling Construction Company's historic earnings and revenue, below, but keep in mind there's always more to the story.

NasdaqGS:STRL Income Statement, April 11th 2019

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It would appear that 7.4% of Sterling Construction Company shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Sterling Construction Company

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.

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 Sterling Construction Company, Inc.. As individuals, the insiders collectively own US$19m worth of the US$337m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, with a 11% stake in the company, will not easily be ignored. 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:

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.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.