Following a 41% decline over last year, recent gains may please R1 RCM Inc. (NASDAQ:RCM) institutional owners
To get a sense of who is truly in control of R1 RCM Inc. (NASDAQ:RCM), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 35% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Last week's US$337m market cap gain would probably be appreciated by institutional investors, especially after a year of 41% losses.
Let's take a closer look to see what the different types of shareholders can tell us about R1 RCM.
Check out our latest analysis for R1 RCM
What Does The Institutional Ownership Tell Us About R1 RCM?
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.
R1 RCM already has institutions on the share registry. Indeed, they own a respectable stake in 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 R1 RCM's historic earnings and revenue below, but keep in mind there's always more to the story.
R1 RCM is not owned by hedge funds. Our data shows that New Mountain Capital Group, L.P. is the largest shareholder with 33% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 4.0% and 3.4%, of the shares outstanding, respectively.
On further inspection, we found that more than half the company's shares are owned by the top 10 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of R1 RCM
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.
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 data suggests that insiders own under 1% of R1 RCM Inc. in their own names. Keep in mind that it's a big company, and the insiders own US$47m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
With a 31% ownership, the general public, mostly comprising of individual investors, have some degree of sway over R1 RCM. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Equity Ownership
With an ownership of 33%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.
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. For example, we've discovered 4 warning signs for R1 RCM (3 are a bit unpleasant!) that you should be aware of before investing here.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
