In the wake of Surmodics, Inc.'s (NASDAQ:SRDX) latest US$31m market cap drop, institutional owners may be forced to take severe actions
Key Insights
Significantly high institutional ownership implies Surmodics' stock price is sensitive to their trading actions
53% of the business is held by the top 8 shareholders
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
A look at the shareholders of Surmodics, Inc. (NASDAQ:SRDX) can tell us which group is most powerful. The group holding the most number of shares in the company, around 57% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
As a result, institutional investors endured the highest losses last week after market cap fell by US$31m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 46% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Surmodics which might hurt individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about Surmodics.
Check out our latest analysis for Surmodics
What Does The Institutional Ownership Tell Us About Surmodics?
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.
As you can see, institutional investors have a fair amount of stake in Surmodics. 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. 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 Surmodics' earnings history below. Of course, the future is what really matters.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Our data indicates that hedge funds own 28% of Surmodics. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. The company's largest shareholder is Trigran Investments, Inc., with ownership of 16%. BlackRock, Inc. is the second largest shareholder owning 7.2% of common stock, and The Vanguard Group, Inc. holds about 7.0% of the company stock. Furthermore, CEO Gary Maharaj is the owner of 1.2% of the company's shares.
We did some more digging and found that 8 of the top shareholders account for roughly 53% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
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 Surmodics
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.
Our most recent data indicates that insiders own some shares in Surmodics, Inc.. In their own names, insiders own US$8.4m worth of stock in the US$272m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 12% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Surmodics better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Surmodics (of which 1 is concerning!) you should know about.
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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