Key Insights

• Significant insider control over Hunan Er-Kang Pharmaceutical implies vested interests in company growth
• A total of 3 investors have a majority stake in the company with 50% ownership
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in Hunan Er-Kang Pharmaceutical Co., Ltd (SZSE:300267) should be aware of the most powerful shareholder groups. With 45% stake, individual insiders possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And following last week's 11% decline in share price, insiders suffered the most losses.

Let's take a closer look to see what the different types of shareholders can tell us about Hunan Er-Kang Pharmaceutical.

What Does The Institutional Ownership Tell Us About Hunan Er-Kang Pharmaceutical?

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.

Less than 5% of Hunan Er-Kang Pharmaceutical is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. So if the company itself can improve over time, we may well see more institutional buyers in the future. It is not uncommon to see a big share price rise if multiple institutional investors are trying to buy into a stock at the same time. So check out the historic earnings trajectory, below, but keep in mind it's the future that counts most.

We note that hedge funds don't have a meaningful investment in Hunan Er-Kang Pharmaceutical. Looking at our data, we can see that the largest shareholder is Fangwen Shuai with 41% of shares outstanding. Hunan Shuaijia Investment Co., Ltd. is the second largest shareholder owning 6.4% of common stock, and Xingni Peng holds about 2.5% of the company stock.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 50% stake.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Hunan Er-Kang Pharmaceutical

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own a reasonable proportion of Hunan Er-Kang Pharmaceutical Co., Ltd. Insiders own CN¥2.7b worth of shares in the CN¥5.9b company. 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

With a 44% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hunan Er-Kang Pharmaceutical. 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 8.7%, 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 Hunan Er-Kang Pharmaceutical better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Hunan Er-Kang Pharmaceutical you should know about.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.