Every investor in Performant Financial Corporation (NASDAQ:PFMT) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Companies that have been privatized tend to have low insider ownership.
With a market capitalization of US$124m, Performant Financial is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about Performant Financial.
What Does The Institutional Ownership Tell Us About Performant Financial?
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 Performant Financial does have institutional investors; and they hold a good portion of the company’s stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Performant Financial, (below). Of course, keep in mind that there are other factors to consider, too.
Our data indicates that hedge funds own 23% of Performant Financial. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. The company’s largest shareholder is Parthenon DCS Holdings, LLC, with ownership of 25%. With 23% and 6.3% of the shares outstanding respectively, Prescott Group Capital Management L.L.C. and Mill Road Capital Management LLC are the second and third largest shareholders. Furthermore, CEO Lisa Im is the owner of 2.6% of the company’s shares.
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 54% stake.
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. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Performant Financial
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Shareholders would probably be interested to learn that insiders own shares in Performant Financial Corporation. As individuals, the insiders collectively own US$5.5m worth of the US$124m company. This shows at least some alignment, but I usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.
General Public Ownership
With a 31% ownership, the general public have some degree of sway over Performant Financial. 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 Equity Ownership
With an ownership of 6.3%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.
Private Company Ownership
Our data indicates that Private Companies hold 27%, of the company’s shares. 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.
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we’ve spotted 2 warning signs for Performant Financial (of which 1 shouldn’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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