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Every investor in Avid Bioservices, Inc. (NASDAQ:CDMO) should be aware of the most powerful shareholder groups. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. 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.
Avid Bioservices is not a large company by global standards. It has a market capitalization of US$215m, which means it wouldn't have the attention of many 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 CDMO.
What Does The Institutional Ownership Tell Us About Avid Bioservices?
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.
Avid Bioservices already has institutions on the share registry. Indeed, they own 38% of 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 Avid Bioservices's historic earnings and revenue, below, but keep in mind there's always more to the story.
It looks like hedge funds own 14% of Avid Bioservices shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. There is some analyst coverage of the stock, but it could still become more well known, with time.
Insider Ownership Of Avid Bioservices
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 Avid Bioservices, Inc.. It has a market capitalization of just US$215m, and insiders have US$17m worth of shares, in their own names. 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 40% ownership, the general public have some degree of sway over CDMO. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
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.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.