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Are Institutions Heavily Invested In Dialight plc's (LON:DIA) Shares?

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·4 min read
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The big shareholder groups in Dialight plc (LON:DIA) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Companies that used to be publicly owned tend to have lower insider ownership.

Dialight is not a large company by global standards. It has a market capitalization of UK£101m, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Dialight.

Check out our latest analysis for Dialight

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Dialight?

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.

As you can see, institutional investors have a fair amount of stake in Dialight. 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 Dialight's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
earnings-and-revenue-growth

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Dialight is not owned by hedge funds. Generation Investment Management LLP is currently the largest shareholder, with 20% of shares outstanding. In comparison, the second and third largest shareholders hold about 14% and 14% of the stock.

Our research also brought to light the fact that roughly 59% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Dialight

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.

Our most recent data indicates that insiders own less than 1% of Dialight plc. It appears that the board holds about UK£201k worth of stock. This compares to a market capitalization of UK£101m. I generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, with a 11% stake in the company, will not easily be ignored. 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.

Private Equity Ownership

With a stake of 5.6%, private equity firms could influence the Dialight board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Dialight better, we need to consider many other factors.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.