Anyone researching CenterState Bank Corporation (NASDAQ:CSFL) might want to consider the historical volatility of the share price. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. 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 sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all stocks on the market.
Some stocks see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. Some investors use beta as a measure of how much a certain stock is impacted by market risk (volatility). While we should keep in mind that Warren Buffett has cautioned that ‘Volatility is far from synonymous with risk’, beta is still a useful factor to consider. To make good use of it you must first know that the beta of the overall market is 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.
What CSFL’s beta value tells investors
While history does not always repeat, this level of beta may indicate that the stock price will continue to be exposed to market risk, albeit not overly so. Beta is worth considering, but it’s also important to consider whether CenterState Bank is growing earnings and revenue. You can take a look for yourself, below.
Could CSFL’s size cause it to be more volatile?
CenterState Bank is a fairly large company. It has a market capitalisation of US$2.9b, which means it is probably on the radar of most investors. It’s not overly surprising to see large companies with beta values reasonably close to the market average. After all, large companies make up a higher weighting of the index than do small companies.
What this means for you:
It is probable that there is a link between the share price of CenterState Bank 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. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as CenterState Bank’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
- Future Outlook: What are well-informed industry analysts predicting for CSFL’s future growth? Take a look at our free research report of analyst consensus for CSFL’s outlook.
- Past Track Record: Has CSFL 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 CSFL’s historicals for more clarity.
- Other Interesting Stocks: It’s worth checking to see how CSFL measures up against other companies on valuation. You could start with this free list of prospective options.
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