Wednesday, February 28, 2024

With 43% ownership of the shares, EDP – Energias de Portugal, S.A. (ELI:EDP) is heavily dominated by institutional owners

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Key Insights

  • Significantly high institutional ownership implies EDP – Energias de Portugal’s stock price is sensitive to their trading actions
  • 50% of the business is held by the top 6 shareholders
  • Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

Every investor in EDP – Energias de Portugal, S.A. (ELI:EDP) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 43% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.

Let’s delve deeper into each type of owner of EDP – Energias de Portugal, beginning with the chart below.

View our latest analysis for EDP – Energias de Portugal

ENXTLS:EDP Ownership Breakdown March 12th 2023

What Does The Institutional Ownership Tell Us About EDP – Energias de Portugal?

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 EDP – Energias de Portugal does have institutional investors; and they hold a good portion of the company’s stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 EDP – Energias de Portugal, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
ENXTLS:EDP Earnings and Revenue Growth March 12th 2023

Hedge funds don’t have many shares in EDP – Energias de Portugal. China Three Gorges Corporation is currently the largest shareholder, with 20% of shares outstanding. For context, the second largest shareholder holds about 12% of the shares outstanding, followed by an ownership of 7.2% by the third-largest shareholder.

We did some more digging and found that 6 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of EDP – Energias de Portugal

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 less than 1% of EDP – Energias de Portugal, S.A.. However, it’s possible that insiders might have an indirect interest through a more complex structure. As it is a large company, we’d only expect insiders to own a small percentage of it. But it’s worth noting that they own €1.5m worth of shares. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 27% stake in EDP – Energias de Portugal. 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 30%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand EDP – Energias de Portugal better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 2 warning signs with EDP – Energias de Portugal , 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.

Valuation is complex, but we’re helping make it simple.

Find out whether EDP – Energias de Portugal is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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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