Is Crane Co. (NYSE:CR) A Volatile Stock?

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If you own shares in Crane Co. (NYSE:CR) then it’s worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. 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 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. 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.

View our latest analysis for Crane

What we can learn from CR’s beta value

Looking at the last five years, Crane has a beta of 1.35. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. If this beta value holds true in the future, Crane 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 Crane is growing earnings and revenue. You can take a look for yourself, below.

NYSE:CR Income Statement, June 11th 2019
NYSE:CR Income Statement, June 11th 2019

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

Crane is a reasonably big company, with a market capitalisation of US$4.8b. Most companies this size are actively traded with decent volumes of shares changing hands each day. It takes deep pocketed investors to influence the share price of a large company, so it’s a little unusual to see companies this size with high beta values. It may be that that this company is more heavily impacted by broader economic factors than most.

What this means for you:

Since Crane 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 Crane’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 CR’s future growth? Take a look at our free research report of analyst consensus for CR’s outlook.
  2. Past Track Record: Has CR 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 CR’s historicals for more clarity.
  3. Other Interesting Stocks: It’s worth checking to see how CR 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.