What Kind Of Share Price Volatility Should You Expect For Sabra Health Care REIT, Inc. (NASDAQ:SBRA)?

If you’re interested in Sabra Health Care REIT, Inc. (NASDAQ:SBRA), 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 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 Sabra Health Care REIT

What SBRA’s beta value tells investors

Looking at the last five years, Sabra Health Care REIT has a beta of 0.83. 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 Sabra Health Care REIT is growing earnings and revenue. You can take a look for yourself, below.

NasdaqGS:SBRA Income Statement, October 1st 2019
NasdaqGS:SBRA Income Statement, October 1st 2019

Does SBRA’s size influence the expected beta?

Sabra Health Care REIT is a fairly large company. It has a market capitalisation of US$4.4b, which means it is probably on the radar of most investors. When large companies like this one have a low beta value, there is usually some other factor that is having an outsized impact on the share price. For example, a business with significant fixed regulated assets might earn a reasonably predictable return, regardless of broader macroeconomic factors. Alternatively, lumpy earnings might mean minimal share price correlation with the broader market.

What this means for you:

One potential advantage of owning low beta stocks like Sabra Health Care REIT is that your overall portfolio won’t be too sensitive to overall market movements. However, this can be a blessing or a curse, depending on what’s happening in the broader market. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as Sabra Health Care REIT’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 SBRA’s future growth? Take a look at our free research report of analyst consensus for SBRA’s outlook.
  2. Past Track Record: Has SBRA 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 SBRA’s historicals for more clarity.
  3. Other Interesting Stocks: It’s worth checking to see how SBRA measures up against other companies on valuation. You could start with this free list of prospective options.

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.

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. Thank you for reading.