If you're interested in ANGI Homeservices Inc. (NASDAQ:ANGI), 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 category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. The second sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all 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. A stock with a beta greater than one is more sensitive to broader market movements than a stock with a beta of less than one.
See our latest analysis for ANGI Homeservices
What we can learn from ANGI's beta value
Zooming in on ANGI Homeservices, we see it has a five year beta of 1.72. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. If this beta value holds true in the future, ANGI Homeservices shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. 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 ANGI Homeservices fares in that regard, below.
Does ANGI's size influence the expected beta?
ANGI Homeservices is a reasonably big company, with a market capitalisation of US$4.7b. 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:
Beta only tells us that the ANGI Homeservices 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. In order to fully understand whether ANGI is a good investment for you, we also need to consider important company-specific fundamentals such as ANGI Homeservices’s financial health and performance track record. I urge you to continue your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for ANGI’s future growth? Take a look at our free research report of analyst consensus for ANGI’s outlook.
- Financial Health: Are ANGI’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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.
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