With 82% of the shares owned, Automatic Data Processing (NASDAQ:ADP) is heavily controlled by institutional owners.

key insights

• Given the significant stake in the stock by financial institutions, Automatic Data Processing’s stock price may be sensitive to financial institutions’ trading decisions
• The top 25 shareholders own 47% of the company
• Analyst forecasts and ownership data help give you a strong idea about business prospects

A look at Automatic Data Processing, Inc. (NASDAQ:ADP)’s shareholders can tell us which group is the most powerful. We can see that institutional investors control the majority of the company, with their holdings of 82%. In other words, this group faces the greatest upside potential (or downside risk).

Because institutional investors have access to large amounts of capital, their market trends tend to be closely monitored by retail and retail investors. Therefore, having significant institutional investors invested in a company is often considered a desirable characteristic.

Let’s take a closer look to see what different types of shareholders can tell us about automatic data processing.

Read our latest analysis on Automatic Data Processing.

What does institutional ownership say about automatic data processing?

Institutional investors commonly compare their own returns to the returns of a closely followed index. So they usually consider buying larger companies that are included in the relevant benchmark index.

We may note that automatic data processing has institutional investors. And they own a significant portion of the company’s stock. This suggests some credibility among professional investors. But we can’t rely on that fact alone because institutions make bad investments sometimes, just like everyone does. 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 Automatic Data Processing’s past earnings trajectory, (below). Of course, keep in mind that there are other factors to consider as well.

Institutional investors own more than half of the outstanding shares, so the board will need to pay attention to their preferences. Automatic Data Processing is not owned by hedge funds. Vanguard Group is currently the company’s largest shareholder with 9.6% of outstanding shares. On the other hand, the second and third largest shareholders hold about 8.1% of the stock and his own 4.3%.

After reviewing our ownership data, we found that the 25 largest shareholders collectively own less than 50% of the share registry. This means that no single individual has a majority interest.

Researching institutional ownership is a good way to assess and filter a stock’s expected performance. The same can be done by studying analyst sentiment. There are plenty of analysts covering the stock, so it might be worth seeing what they are predicting.

Insider ownership of automatic data processing

The precise definition of an insider can be subjective, but almost everyone considers board members to be insiders. A company’s management runs the business, but the CEO answers to the board, even if he or she is a member of the board.

Insider ownership is positive when it signals leaders 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 depending on the situation.

Our data suggests that insiders own less than 1% of Automatic Data Processing, Inc. shares in their own names. It is a large company, so we can expect insiders to own only a small percentage of its shares. However, it is worth noting that they own US$108m worth of shares. It’s good to see board members owning shares, so it might be worth checking if insiders have been buying shares.

Open to the public

The general public, including retail investors, owns 18% of the company, so they can’t be easily ignored. Although this size of ownership is significant, it may not be enough to change company policy if the decision is not aligned with other large shareholders.

Next steps:

It’s always worth thinking about the different groups who own shares in a company. However, to better understand automatic data processing, many other factors need to be considered.

I like to dive deeper Analyze how a company has performed in the past. Click here for past revenue and profits. Detailed graph.

But in the end it’s the futureIt, not the past, determines how well the owner of this business will do. So we might consider this free report showing whether analysts are predicting a bright future.

Note: The numbers in this article are calculated using data from the previous 12 months and refer to the 12-month period ending on the last day of the month in which the financial statements are dated. This may not match the 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 using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.