How Does Le Bélier SA (EPA:BELI) Affect Your Portfolio Volatility?

If you own shares in Le Bélier SA (EPA:BELI) then it’s worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. 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 category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. 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 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.

View our latest analysis for Le Bélier

What we can learn from BELI’s beta value

Given that it has a beta of 1.21, we can surmise that the Le Bélier share price has been fairly sensitive to market volatility (over the last 5 years). If the past is any guide, we would expect that Le Bélier 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 Le Bélier is growing earnings and revenue. You can take a look for yourself, below.

ENXTPA:BELI Income Statement, December 8th 2019
ENXTPA:BELI Income Statement, December 8th 2019

Could BELI’s size cause it to be more volatile?

Le Bélier is a noticeably small company, with a market capitalisation of €192m. Most companies this size are not always actively traded. It takes less money to influence the share price of a very small company. This may explain the excess volatility implied by this beta value.

What this means for you:

Since Le Bélier 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. In order to fully understand whether BELI is a good investment for you, we also need to consider important company-specific fundamentals such as Le Bélier’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Future Outlook: What are well-informed industry analysts predicting for BELI’s future growth? Take a look at our free research report of analyst consensus for BELI’s outlook.
  2. Past Track Record: Has BELI 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 BELI’s historicals for more clarity.
  3. Other Interesting Stocks: It’s worth checking to see how BELI 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.

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.