Advantage Solutions Inc.’s (NASDAQ:ADV) market cap touched US$1.3b last week, benefiting both private equity firms who own 57% as well as institutions


Key Insights

  • Advantage Solutions’ significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
  • 57% of the company is held by a single shareholder (Leonard Green & Partners, L.P.)
  • Insiders have bought recently

Every investor in Advantage Solutions Inc. (NASDAQ:ADV) should be aware of the most powerful shareholder groups. With 57% stake, private equity firms possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Following a 7.3% increase in the stock price last week, private equity firms profited the most, but institutions who own 23% stock also stood to gain from the increase.

In the chart below, we zoom in on the different ownership groups of Advantage Solutions.

See our latest analysis for Advantage Solutions

ownership-breakdown
NasdaqGS:ADV Ownership Breakdown February 12th 2024

What Does The Institutional Ownership Tell Us About Advantage Solutions?

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 Advantage Solutions 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. 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 Advantage Solutions’ earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NasdaqGS:ADV Earnings and Revenue Growth February 12th 2024

Advantage Solutions is not owned by hedge funds. Leonard Green & Partners, L.P. is currently the largest shareholder, with 57% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. With 3.5% and 3.4% of the shares outstanding respectively, T. Rowe Price Group, Inc. and Centerview Capital Holdings, LLC are the second and third largest shareholders.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Advantage Solutions

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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.

Shareholders would probably be interested to learn that insiders own shares in Advantage Solutions Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$18m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public– including retail investors — own 18% stake in the company, and hence can’t easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

Private equity firms hold a 57% stake in Advantage Solutions. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and — as the name suggests — don’t invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We’ve identified 1 warning sign with Advantage Solutions , and understanding them should be part of your investment process.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.

Valuation is complex, but we’re helping make it simple.

Find out whether Advantage Solutions is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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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.



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