If you own shares in Geox S.p.A. (
BIT:GEO
) then it’s worth thinking about how it contributes to the volatility of your portfolio,maytag bravos mct washer not spinning clothes dry overall. In finance, Beta is a measure of volatility. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. First, we have company specific volatility, which is the price gyrations of an individual stock. Holding at least 8 stocks can reduce this kind of risk across a portfolio. The second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.
Some stocks see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. Beta can be a useful tool to understand how much a stock is influenced by market risk (volatility). However, Warren Buffett said ‘volatility is far from synonymous with risk’ in his 2014 letter to investors. So, while useful, beta is not the only metric to consider. To use beta as an investor, you must first understand that the overall market has a beta of one. A stock with a beta below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.
Check out our latest analysis for Geox
What GEO’s beta value tells investors
Looking at the last five years, Geox has a beta of 0.82. The fact that this is well below 1 indicates that its share price movements haven’t historically been very sensitive to overall market volatility. This means that — if history is a guide — buying the stock would reduce the impact of overall market volatility in many portfolios (depending on the beta of the portfolio, of course). Beta is worth considering, but it’s also important to consider whether Geox is growing earnings and revenue. You can take a look for yourself, below.
BIT:GEO Income Statement Export January 2nd 19
Could GEO’s size cause it to be more volatile?
Geox is a noticeably small company, with a market capitalisation of €304m. Most companies this size are not always actively traded. Very small companies often have a low beta value because their share prices are not well correlated with market volatility. This could be because the price is reacting to company specific events. Alternatively, the shares may not be actively traded.
What this means for you:
The Geox doesn’t usually show much sensitivity to the broader market. This could be for a variety of reasons. Typically, smaller companies have a low beta if their share price tends to move a lot due to company specific developments. Alternatively, an strong dividend payer might move less than the market because investors are valuing it for its income stream. In order to fully understand whether GEO is a good investment for you, we also need to consider important company-specific fundamentals such as Geox’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
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Future Outlook
: What are well-informed industry analysts predicting for GEO’s future growth? Take a look at our
free research report of analyst consensus
for GEO’s outlook.
Past Track Record
: Has GEO been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at
the free visual representations of GEO’s historicals
for more clarity.
Other Interesting Stocks
: It’s worth checking to see how GEO measures up against other companies on valuation. You could start with this
free list of prospective options
.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at
.
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