Key Insights

• Significant control over Rainbow Digital Commercial by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 2 shareholders own 58% of the company
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of Rainbow Digital Commercial Co., Ltd. (SZSE:002419), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are private companies with 59% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, private companies collectively scored the highest last week as the company hit CN¥6.4b market cap following a 6.2% gain in the stock.

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

What Does The Institutional Ownership Tell Us About Rainbow Digital Commercial?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

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

Rainbow Digital Commercial is not owned by hedge funds. Aviation Industry Corporation of China,Ltd. is currently the company's largest shareholder with 45% of shares outstanding. In comparison, the second and third largest shareholders hold about 14% and 1.2% of the stock.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of 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 Rainbow Digital Commercial

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.

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 data suggests that insiders own under 1% of Rainbow Digital Commercial Co., Ltd. in their own names. But they may have an indirect interest through a corporate structure that we haven't picked up on. It has a market capitalization of just CN¥6.4b, and the board has only CN¥19m worth of shares in their own names. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

The general public-- including retail investors -- own 34% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 59%, of the company's shares. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 2 warning signs we've spotted with Rainbow Digital Commercial .

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.