What You Must Know About Hyster-Yale Materials Handling, Inc.’s (NYSE:HY) Beta Value

Anyone researching Hyster-Yale Materials Handling, Inc. (NYSE:HY) might want to consider the historical volatility of the share price. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. The first category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. 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 mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated 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 Hyster-Yale Materials Handling

What HY’s beta value tells investors

With a beta of 0.96, (which is quite close to 1) the share price of Hyster-Yale Materials Handling has historically been about as voltile as the broader market. While history does not always repeat, this may indicate that the stock price will continue to be exposed to market risk, albeit not overly so. Share price volatility is well worth considering, but most long term investors consider the history of revenue and earnings growth to be more important. Take a look at how Hyster-Yale Materials Handling fares in that regard, below.

NYSE:HY Income Statement, March 14th 2019
NYSE:HY Income Statement, March 14th 2019

Does HY’s size influence the expected beta?

Hyster-Yale Materials Handling is a small company, but not tiny and little known. It has a market capitalisation of US$1.1b, which means it would be on the radar of intstitutional investors. Small companies often have a high beta value because the stock price can move on relatively low capital flows. So it’s interesting to note that this stock historically has a beta value quite close to one.

What this means for you:

It is probable that there is a link between the share price of Hyster-Yale Materials Handling and the broader market, since it has a beta value quite close to one. However, long term investors are generally well served by looking past market volatility and focussing on the underlying development of the business. If that’s your game, metrics such as revenue, earnings and cash flow will be more useful. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as Hyster-Yale Materials Handling’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 HY’s future growth? Take a look at our free research report of analyst consensus for HY’s outlook.
  2. Past Track Record: Has HY 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 HY’s historicals for more clarity.
  3. Other Interesting Stocks: It’s worth checking to see how HY 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.