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Could Travelzoo's (NASDAQ:TZOO) Investor Composition Influence The Stock Price?

Simply Wall St

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A look at the shareholders of Travelzoo (NASDAQ:TZOO) can tell us which group is most powerful. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. 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.'

With a market capitalization of US$173m, Travelzoo is a small cap stock, so it might not be well known by many institutional investors. In the chart below below, we can see that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about TZOO.

View our latest analysis for Travelzoo

NasdaqGS:TZOO Ownership Summary, July 4th 2019

What Does The Institutional Ownership Tell Us About Travelzoo?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Travelzoo already has institutions on the share registry. Indeed, they own 36% 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Travelzoo, (below). Of course, keep in mind that there are other factors to consider, too.

NasdaqGS:TZOO Income Statement, July 4th 2019

We note that hedge funds don't have a meaningful investment in Travelzoo. 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 Travelzoo

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Our information suggests that insiders own more than half of Travelzoo. This gives them effective control of the company. That means they own US$92m worth of shares in the US$173m company. That's quite meaningful. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public holds a 11% stake in TZOO. 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:

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.

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.