Is Neogen Corporation (NASDAQ:NEOG) A Volatile Stock?

Anyone researching Neogen Corporation (NASDAQ:NEOG) 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. 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. A stock with a beta greater than one is more sensitive to broader market movements than a stock with a beta of less than one.

See our latest analysis for Neogen

What NEOG's beta value tells investors

Given that it has a beta of 1.36, we can surmise that the Neogen share price has been fairly sensitive to market volatility (over the last 5 years). If this beta value holds true in the future, Neogen shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Beta is worth considering, but it's also important to consider whether Neogen is growing earnings and revenue. You can take a look for yourself, below.

How does NEOG's size impact its beta?

With a market capitalisation of US$3.5b, Neogen is a pretty big company, even by global standards. It is quite likely well known to very many investors. It takes a lot of money to influence the share price of large companies like this one. That makes it interesting to note that its share price has a history of sensitivity to market volatility. There might be some aspect of the business that means profits are leveraged to the economic cycle.

What this means for you:

Since Neogen tends to moves up when the market is going up, and down when it's going down, potential investors may wish to reflect on the overall market, when considering the stock. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Neogen’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

1. Future Outlook: What are well-informed industry analysts predicting for NEOG’s future growth? Take a look at our free research report of analyst consensus for NEOG’s outlook.
2. Past Track Record: Has NEOG 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 NEOG's historicals for more clarity.
3. Other Interesting Stocks: It's worth checking to see how NEOG measures up against other companies on valuation. You could start with this free list of prospective options.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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