Given the large stake in the stock by institutions, Babcock & Wilcox Enterprises' stock price might be vulnerable to their trading decisions
51% of the business is held by the top 5 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 Babcock & Wilcox Enterprises, Inc. (NYSE:BW) can tell us which group is most powerful. The group holding the most number of shares in the company, around 50% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Institutional investors would probably welcome last week's 13% increase in the share price after a year of 70% losses as a sign that returns may to begin trending higher.
In the chart below, we zoom in on the different ownership groups of Babcock & Wilcox Enterprises.
What Does The Institutional Ownership Tell Us About Babcock & Wilcox Enterprises?
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.
We can see that Babcock & Wilcox Enterprises does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Babcock & Wilcox Enterprises' earnings history below. Of course, the future is what really matters.
earnings-and-revenue-growth
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Babcock & Wilcox Enterprises is not owned by hedge funds. B. Riley Financial, Inc. is currently the largest shareholder, with 30% of shares outstanding. For context, the second largest shareholder holds about 7.4% of the shares outstanding, followed by an ownership of 4.9% by the third-largest shareholder. Furthermore, CEO Kenneth Young is the owner of 1.7% of the company's shares.
To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Babcock & Wilcox Enterprises
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.
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.
We can report that insiders do own shares in Babcock & Wilcox Enterprises, Inc.. In their own names, insiders own US$9.2m worth of stock in the US$162m company. This shows at least some alignment, but we usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 14% stake in Babcock & Wilcox Enterprises. 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.
Public Company Ownership
Public companies currently own 30% of Babcock & Wilcox Enterprises stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Babcock & Wilcox Enterprises better, we need to consider many other factors. Take risks for example - Babcock & Wilcox Enterprises has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this freereport 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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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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