Should You Be Concerned About SW Umwelttechnik Stoiser & Wolschner AG’s (VIE:SWUT) Historical Volatility?

If you’re interested in SW Umwelttechnik Stoiser & Wolschner AG (VIE:SWUT), 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. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. 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 are more sensitive to general market forces than others. 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. 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.

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View our latest analysis for SW Umwelttechnik Stoiser & Wolschner

What SWUT’s beta value tells investors

Zooming in on SW Umwelttechnik Stoiser & Wolschner, we see it has a five year beta of 1.3. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. If the past is any guide, we would expect that SW Umwelttechnik Stoiser & Wolschner shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. Beta is worth considering, but it’s also important to consider whether SW Umwelttechnik Stoiser & Wolschner is growing earnings and revenue. You can take a look for yourself, below.

WBAG:SWUT Income Statement, May 26th 2019
WBAG:SWUT Income Statement, May 26th 2019

Does SWUT’s size influence the expected beta?

SW Umwelttechnik Stoiser & Wolschner is a rather small company. It has a market capitalisation of €11m, which means it is probably under the radar of most investors. Relatively few investors can influence the price of a smaller company, compared to a large company. This could explain the high beta value, in this case.

What this means for you:

Beta only tells us that the SW Umwelttechnik Stoiser & Wolschner share price is sensitive to broader market movements. This could indicate that it is a high growth company, or is heavily influenced by sentiment because it is speculative. Alternatively, it could have operating leverage in its business model. Ultimately, beta is an interesting metric, but there’s plenty more to learn. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as SW Umwelttechnik Stoiser & Wolschner’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 SWUT’s future growth? Take a look at our free research report of analyst consensus for SWUT’s outlook.
  2. Past Track Record: Has SWUT 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 SWUT’s historicals for more clarity.
  3. Other Interesting Stocks: It’s worth checking to see how SWUT 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.