If you're interested in IBI Group Inc. (
TSE:IBG
),can black mold cause eczema then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the portfolio. The other type, which cannot be diversified away, is the volatility of the entire market. Every stock in the market is exposed to this volatility, which is linked to the fact that stocks prices are correlated in an efficient market.
Some stocks see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. Beta is a widely used metric to measure a stock's exposure to market risk (volatility). Before we go on, it's worth noting that Warren Buffett pointed out in his 2014 letter to shareholders that 'volatility is far from synonymous with risk.' Having said that, beta can still be rather useful. The first thing to understand about beta is that the beta of the overall market is one. Any stock with a beta of greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or poorly correlated with the market.
View our latest analysis for IBI Group
What we can learn from IBG's beta value
Given this level of beta, if the future looks like the past, we could therefore consider it likely that the stock price will experience share price volatility that is roughly similar to the overall market. Beta is worth considering, but it's also important to consider whether IBI Group is growing earnings and revenue. You can take a look for yourself, below.
TSX:IBG Income Statement, March 2nd 2020
How does IBG's size impact its beta?
With a market capitalisation of CA$193m, IBI Group is a very small company by global standards. It is quite likely to be unknown to most investors. It doesn't take much money to really move the share price of a company as small as this one. That makes it somewhat unusual that it has a beta value so close to the overall market.
What this means for you:
It is probable that there is a link between the share price of IBI Group and the broader market, since it has a beta value quite close to one. However, long term investors are generally well served by looking past market volatility and focussing on the underlying development of the business. If that's your game, metrics such as revenue, earnings and cash flow will be more useful. In order to fully understand whether IBG is a good investment for you, we also need to consider important company-specific fundamentals such as IBI Group’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 IBG’s future growth? Take a look at our
free research report of analyst consensus
for IBG’s outlook.
Past Track Record
: Has IBG 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 IBG's historicals
for more clarity.
Other Interesting Stocks
: It's worth checking to see how IBG measures up against other companies on valuation. You could start with this
free list of prospective options
.
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. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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