Institutional owners may consider drastic measures as RadNet, Inc.'s (NASDAQ:RDNT) recent US$130m drop adds to long-term losses
Every investor in RadNet, Inc. (NASDAQ:RDNT) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 69% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
As a result, institutional investors endured the highest losses last week after market cap fell by US$130m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 51% for shareholders. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell RadNet which might hurt individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about RadNet.
Check out our latest analysis for RadNet
What Does The Institutional Ownership Tell Us About RadNet?
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.
RadNet already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 RadNet, (below). Of course, keep in mind that there are other factors to consider, too.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. RadNet is not owned by hedge funds. The company's largest shareholder is BlackRock, Inc., with ownership of 11%. For context, the second largest shareholder holds about 9.4% of the shares outstanding, followed by an ownership of 5.6% by the third-largest shareholder.
A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of RadNet
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.
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.
Our most recent data indicates that insiders own a reasonable proportion of RadNet, Inc.. Insiders have a US$141m stake in this US$967m business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 16% stake in RadNet. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with RadNet , and understanding them should be part of your investment process.
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.
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.
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