The big shareholder groups in Pacific Ethanol, Inc. (NASDAQ:PEIX) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.'
With a market capitalization of US$50m, Pacific Ethanol is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about PEIX.
What Does The Institutional Ownership Tell Us About Pacific Ethanol?
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.
Pacific Ethanol already has institutions on the share registry. Indeed, they own 46% of the company. 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. 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 Pacific Ethanol, (below). Of course, keep in mind that there are other factors to consider, too.
Pacific Ethanol is not owned by hedge funds. 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 Pacific Ethanol
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.
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.
Shareholders would probably be interested to learn that insiders own shares in Pacific Ethanol, Inc.. As individuals, the insiders collectively own US$3.9m worth of the US$50m company. Some would say this shows alignment of interests between shareholders and the board, though I generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.
General Public Ownership
With a 46% ownership, the general public have some degree of sway over PEIX. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
It's always worth thinking about the different groups who own shares in a company. But to understand Pacific Ethanol better, we need to consider many other factors.
I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
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.
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