The big shareholder groups in Escorts Limited (NSE:ESCORTS) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. 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.
With a market capitalization of ₹61b, Escorts is a decent size, so it is probably on the radar of institutional investors. In the chart below below, we can see that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about ESCORTS.
What Does The Institutional Ownership Tell Us About Escorts?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
As you can see, institutional investors own 26% of Escorts. 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 Escorts's historic earnings and revenue, below, but keep in mind there's always more to the story.
Escorts is not owned by hedge funds. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Escorts
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Shareholders would probably be interested to learn that insiders own shares in Escorts Limited. In their own names, insiders own ₹5.8b worth of stock in the ₹61b 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
With a 20% ownership, the general public have some degree of sway over ESCORTS. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Company Ownership
It seems that Private Companies own 43%, of the ESCORTS stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
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 .
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.
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