Key Insights

• Given the large stake in the stock by institutions, Cardinal Health's stock price might be vulnerable to their trading decisions
• The top 19 shareholders own 51% of the company
• Insiders have been selling lately

To get a sense of who is truly in control of Cardinal Health, Inc. (NYSE:CAH), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 88% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And things are looking up for institutional investors after the company gained US$896m in market cap last week. The one-year return on investment is currently 24% and last week's gain would have been more than welcomed.

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

Check out our latest analysis for Cardinal Health

What Does The Institutional Ownership Tell Us About Cardinal Health?

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.

As you can see, institutional investors have a fair amount of stake in Cardinal Health. 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. 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 Cardinal Health's 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. Hedge funds don't have many shares in Cardinal Health. BlackRock, Inc. is currently the company's largest shareholder with 13% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 13% of common stock, and State Street Global Advisors, Inc. holds about 5.9% of the company stock.

After doing some more digging, we found that the top 19 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Cardinal Health

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 less than 1% of Cardinal Health, Inc.. 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 US$115m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 11% stake in Cardinal Health. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

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 2 warning signs for Cardinal Health you should be aware of, and 1 of them is a bit unpleasant.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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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.