Institutional investors may overlook Enterprise Financial Services Corp's (NASDAQ:EFSC) recent US$84m market cap drop as long-term gains remain positive

Key Insights

• Institutions' substantial holdings in Enterprise Financial Services implies that they have significant influence over the company's share price
• 51% of the business is held by the top 11 shareholders
• Insiders have been selling lately

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Every investor in Enterprise Financial Services Corp (NASDAQ:EFSC) should be aware of the most powerful shareholder groups. With 79% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Institutional investors was the group most impacted after the company's market cap fell to US$1.8b last week. Still, the 25% one-year gains may have helped mitigate their overall losses. They should, however, be mindful of further losses in the future.

Let's take a closer look to see what the different types of shareholders can tell us about Enterprise Financial Services.

See our latest analysis for Enterprise Financial Services

What Does The Institutional Ownership Tell Us About Enterprise Financial Services?

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 Enterprise Financial Services 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Enterprise Financial Services' earnings history below. Of course, the future is what really matters.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Enterprise Financial Services. BlackRock, Inc. is currently the largest shareholder, with 11% of shares outstanding. Wellington Management Group LLP is the second largest shareholder owning 9.1% of common stock, and Dimensional Fund Advisors LP holds about 6.0% of the company stock.

A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Enterprise Financial Services

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.

We can see that insiders own shares in Enterprise Financial Services Corp. This is a big company, so it is good to see this level of alignment. Insiders own US$36m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 19% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Enterprise Financial Services. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Enterprise Financial Services you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company .

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.