Significantly high institutional ownership suggests that eHealth’s share price is sensitive to their trading activity
50% of the company is owned by the 11 largest shareholders
Insiders have been buying recently
To get a sense of who really has control of eHealth, Inc. (NASDAQ:EHTH), it’s important to understand the company’s ownership structure. And the group that holds the biggest piece of the pie are institutions, with 53% ownership. In other words, the group has maximum upside potential (or downside risk).
As a result, institutional investors benefited the most after the company’s share price rose 10% last week. The one-year return on capital currently stands at 77% and last week’s increase would have been more than pleasing.
Let’s dive deeper into each type of eHealth owner, starting with the table below.
Check out our latest analysis for eHealth
What does institutional ownership tell us about eHealth?
Many institutions measure their performance against an index that approximates the local market. That’s why they usually pay more attention to companies that are included in major indices.
We can see that eHealth has institutional investors; and they hold a majority of the company’s shares. This suggests a certain level of credibility among professional investors. But we can’t rely on this fact alone, as institutions make bad investments sometimes, just like everyone else. 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’s worth taking a look at eHealth’s earnings performance to date (see below). Of course, keep in mind that there are other factors to consider as well.
Investors should note that institutions actually own more than half of the company, so collectively they can wield significant power. It appears that 17% of eHealth stocks are controlled by hedge funds. This is worth noting because hedge funds are often quite active investors who may try to influence management. Many would like to see value creation (and a higher share price) in the short or medium term. Palo Alto Investors LP is currently the company’s largest shareholder with 9.7% of shares outstanding. BlackRock, Inc. is the second largest shareholder with 9.1% of the common shares, and 8 Knots Management, LLC holds approximately 7.8% of the company’s shares. In addition, CEO Francis Soistman owns 1.1% of the company’s shares.
A look at the shareholder register shows that 50% of the ownership is controlled by the top 11 shareholders, meaning that no single shareholder has a controlling interest in the property.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting too.
Insider ownership of eHealth
While the exact definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management reports to the board of directors and the board is supposed to represent the interests of the shareholders. It is noteworthy that sometimes top managers themselves sit on the board.
In general, I think insider ownership is a good thing. However, in some cases it becomes more difficult for other shareholders to hold the board accountable for decisions.
We can report that insiders own shares in eHealth, Inc. The company has a market capitalization of just US$249m, and insiders own US$7.8m worth of shares in their own names. This shows at least some agreement. You can click here to see if these insiders have been buying or selling.
General public property
With a share of 26%, the general public, which largely consists of individual investors, has some influence on eHealth. While this group doesn’t necessarily call the shots, it can certainly have a real influence on how the company is run.
While it’s certainly worth considering the different ownership groups in a company, there are other factors that are even more important. Note that eHealth is displayed 1 warning sign in our investment analysis you should know that…
If you’d rather see what analysts are predicting in terms of future growth, don’t miss this free Analyst forecast report.
Note: The figures in this article are calculated using the last twelve months of data, which refers to the twelve-month period ending on the last day of the month in which the financial statements are dated. This may not be consistent with the full year annual report figures.
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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.