Key Insights

• Institutions' substantial holdings in Cognyte Software implies that they have significant influence over the company's share price
• A total of 9 investors have a majority stake in the company with 52% ownership
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

Every investor in Cognyte Software Ltd. (NASDAQ:CGNT) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 48% 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.

Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 13% last week. However, the 13% one-year return to shareholders may have helped lessen their pain. They should, however, be mindful of further losses in the future.

Let's delve deeper into each type of owner of Cognyte Software, beginning with the chart below.

What Does The Institutional Ownership Tell Us About Cognyte Software?

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.

We can see that Cognyte Software 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Cognyte Software, (below). Of course, keep in mind that there are other factors to consider, too.

It looks like hedge funds own 14% of Cognyte Software shares. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. The company's largest shareholder is Edenbrook Capital, Llc, with ownership of 8.5%. For context, the second largest shareholder holds about 8.2% of the shares outstanding, followed by an ownership of 7.7% by the third-largest shareholder. Furthermore, CEO Elad Sharon is the owner of 0.5% of the company's shares.

On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Cognyte Software

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 some shares in Cognyte Software Ltd.. In their own names, insiders own US$22m worth of stock in the US$535m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 27% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Cognyte Software. 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 Company Ownership

We can see that Private Companies own 7.7%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Cognyte Software better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Cognyte Software (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

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.

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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.