Key Insights

• Significant control over Guangdong Lifestrong Pharmacy by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 2 shareholders own 56% of the company
• 11% of Guangdong Lifestrong Pharmacy is held by insiders

To get a sense of who is truly in control of Guangdong Lifestrong Pharmacy Co., Ltd. (SZSE:301111), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are private companies with 56% ownership. 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, private companies collectively scored the highest last week as the company hit CN¥3.0b market cap following a 15% gain in the stock.

In the chart below, we zoom in on the different ownership groups of Guangdong Lifestrong Pharmacy.

What Does The Institutional Ownership Tell Us About Guangdong Lifestrong Pharmacy?

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 Guangdong Lifestrong Pharmacy does have institutional investors; and they hold a good portion of the company's stock. 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 Guangdong Lifestrong Pharmacy'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 Guangdong Lifestrong Pharmacy. The company's largest shareholder is Shantou Huayin Group Co., Ltd., with ownership of 45%. For context, the second largest shareholder holds about 11% of the shares outstanding, followed by an ownership of 7.5% by the third-largest shareholder.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of 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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Guangdong Lifestrong Pharmacy

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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.

Our most recent data indicates that insiders own a reasonable proportion of Guangdong Lifestrong Pharmacy Co., Ltd.. Insiders have a CN¥340m stake in this CN¥3.0b business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 25% stake in Guangdong Lifestrong Pharmacy. 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 56%, of the shares on issue. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Guangdong Lifestrong Pharmacy better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Guangdong Lifestrong Pharmacy you should be aware of, and 1 of them is concerning.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.