Key Insights

• Insiders appear to have a vested interest in Shenzhen Etmade Automatic Equipment's growth, as seen by their sizeable ownership
• 51% of the business is held by the top 5 shareholders
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

Every investor in Shenzhen Etmade Automatic Equipment Co., Ltd. (SZSE:300812) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are individual insiders with 47% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And following last week's 15% decline in share price, insiders suffered the most losses.

In the chart below, we zoom in on the different ownership groups of Shenzhen Etmade Automatic Equipment.

What Does The Institutional Ownership Tell Us About Shenzhen Etmade Automatic Equipment?

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.

Shenzhen Etmade Automatic Equipment already has institutions on the share registry. Indeed, they own a respectable stake in 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. 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 Shenzhen Etmade Automatic Equipment's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Shenzhen Etmade Automatic Equipment. Minghua Chai is currently the company's largest shareholder with 17% of shares outstanding. In comparison, the second and third largest shareholders hold about 15% and 8.8% of the stock. Note that the second and third-largest shareholders are also Chief Executive Officer and Member of the Board of Directors, respectively, meaning that the company's top shareholders are insiders.

On looking further, we found that 51% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Shenzhen Etmade Automatic Equipment

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.

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 a reasonable proportion of Shenzhen Etmade Automatic Equipment Co., Ltd.. Insiders have a CN¥1.3b stake in this CN¥2.8b business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 36% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shenzhen Etmade Automatic Equipment. 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

It seems that Private Companies own 7.8%, of the Shenzhen Etmade Automatic Equipment stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Shenzhen Etmade Automatic Equipment (of which 1 can't be ignored!) you should know about.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com