The big shareholder groups in RXP Services Limited (ASX:RXP) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.
RXP Services is not a large company by global standards. It has a market capitalization of AU$83m, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it's seems that institutions are noticeable on the share registry. Let's take a closer look to see what the different types of shareholder can tell us about RXP.
What Does The Institutional Ownership Tell Us About RXP Services?
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.
RXP Services already has institutions on the share registry. Indeed, they own 27% 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. 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 RXP Services's earnings history, below. Of course, the future is what really matters.
We note that hedge funds don't have a meaningful investment in RXP Services. 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 RXP Services
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 some shares in RXP Services Limited. In their own names, insiders own AU$6.5m worth of stock in the AU$83m company. It is good to see some investment by insiders, but I usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.
General Public Ownership
With a 46% ownership, the general public have some degree of sway over RXP. 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 6.1%, private equity firms could influence the RXP 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.
Private Company Ownership
It seems that Private Companies own 13%, of the RXP stock. 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.
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.
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.
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