After losing 21% in the past year, Cumulus Media Inc. (NASDAQ:CMLS) institutional owners must be relieved by the recent gain
Key Insights
Significantly high institutional ownership implies Cumulus Media's stock price is sensitive to their trading actions
50% of the business is held by the top 22 shareholders
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
To get a sense of who is truly in control of Cumulus Media Inc. (NASDAQ:CMLS), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 52% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
Institutional investors would appreciate the 25% increase in share prices last week, given their one-year returns have been disappointing at 21%.
In the chart below, we zoom in on the different ownership groups of Cumulus Media.
View our latest analysis for Cumulus Media
What Does The Institutional Ownership Tell Us About Cumulus Media?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
As you can see, institutional investors have a fair amount of stake in Cumulus Media. 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 Cumulus Media's historic earnings and revenue below, but keep in mind there's always more to the story.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Cumulus Media is not owned by hedge funds. Eaton Vance Management is currently the largest shareholder, with 8.6% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.2% and 4.6%, of the shares outstanding, respectively. In addition, we found that Mary Berner, the CEO has 1.0% of the shares allocated to their name.
After doing some more digging, we found that the top 22 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Cumulus Media
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.
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 Cumulus Media Inc.. As individuals, the insiders collectively own US$4.3m worth of the US$104m company. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.
General Public Ownership
The general public-- including retail investors -- own 39% stake in the company, and hence can't easily be ignored. 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.
Private Company Ownership
We can see that Private Companies own 4.6%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
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 1 warning sign with Cumulus Media , and understanding them should be part of your investment process.
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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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.
