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Do Directors Own Evolution Petroleum Corporation (NYSEMKT:EPM) Shares?

The big shareholder groups in Evolution Petroleum Corporation (NYSEMKT:EPM) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, ‘Don’t tell me what you think, tell me what you have in your portfolio.’

With a market capitalization of US$253m, Evolution Petroleum 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 institutional investors have bought into the company. Let’s take a closer look to see what the different types of shareholder can tell us about EPM.

Check out our latest analysis for Evolution Petroleum

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AMEX:EPM Ownership Summary January 23rd 19
AMEX:EPM Ownership Summary January 23rd 19

What Does The Institutional Ownership Tell Us About Evolution Petroleum?

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.

Evolution Petroleum already has institutions on the share registry. Indeed, they own 64% of the company. This suggests some credibility amongst professional investors. But we can’t rely on that fact alone, since institutions make bad investments sometimes, just like everyone does. 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 Evolution Petroleum’s earnings history, below. Of course, the future is what really matters.

AMEX:EPM Income Statement Export January 23rd 19
AMEX:EPM Income Statement Export January 23rd 19

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It would appear that 12% of Evolution Petroleum 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Evolution Petroleum

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 Evolution Petroleum Corporation. In their own names, insiders own US$22m worth of stock in the US$253m 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

The general public holds a 15% stake in EPM. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

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.

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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

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