M M Forgings Limited (NSE:MMFL) insiders, who hold 42% of the firm would be disappointed by the recent pullback - Simply Wall St News

If you want to know who really controls M M Forgings Limited (NSE:MMFL), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 42% to be precise, is individual insiders. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, insiders endured the biggest losses as the stock fell by 11%.

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

Check out our latest analysis for M M Forgings

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that M M Forgings 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 M M Forgings, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in M M Forgings. Looking at our data, we can see that the largest shareholder is Symax Consultants & Trading Pvt. Ltd. with 24% of shares outstanding. In comparison, the second and third largest shareholders hold about 12% and 11% of the stock. Interestingly, the bottom two of the top three shareholders also hold the title of Co-Chief Executive Officer and Member of the Board of Directors, respectively, suggesting that these insiders have a personal stake in the company.

On looking further, we found that 57% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that insiders maintain a significant holding in M M Forgings Limited. Insiders own ₹10b worth of shares in the ₹24b company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

The general public-- including retail investors -- own 13% stake in the company, and hence can't easily be ignored. 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.

It seems that Private Companies own 28%, of the M M Forgings stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

It's always worth thinking about the different groups who own shares in a company. But to understand M M Forgings better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with M M Forgings (including 1 which makes us a bit uncomfortable) .

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.

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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.

Manufactures and sells steel forgings in India.

Good value with adequate balance sheet.