For uniQure NV.’s (NASDAQ:QURE) shareholders, and also potential investors in the stock, understanding how the stock’s risk and return characteristics can impact your portfolio is important. Generally, an investor should consider two types of risk that impact the market value of QURE. The first type is company-specific risk, which can be diversified away by investing in other companies to reduce exposure to one particular stock. The second type is market risk, one that you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks in the market.
Not every stock is exposed to the same level of market risk. A popular measure of market risk for a stock is its beta, and the market as a whole represents a beta value of one. A stock with a beta greater than one is considered more sensitive to market-wide shocks compared to a stock that trades below the value of one.See our latest analysis for uniQure
What is QURE’s market risk?
uniQure’s beta of 0.58 indicates that the stock value will be less variable compared to the whole stock market. The stock will exhibit muted movements in both the downside and upside, in response to changing economic conditions, whereas the general market may move by a lot more. QURE’s beta indicates it is a stock that investors may find valuable if they want to reduce the overall market risk exposure of their stock portfolio.
Could QURE’s size and industry cause it to be more volatile?
QURE, with its market capitalisation of US$588.93M, is a small-cap stock, which generally have higher beta than similar companies of larger size. However, QURE operates in the biotechs industry, which has commonly demonstrated muted reactions to market-wide shocks. As a result, we should expect a high beta for the small-cap QURE but a low beta for the biotechs industry. It seems as though there is an inconsistency in risks from QURE’s size and industry. A potential driver of this variance can be a fundamental factor, which we will take a look at next.
Can QURE’s asset-composition point to a higher beta?
During times of economic downturn, low demand may cause companies to readjust production of their goods and services. It is more difficult for companies to lower their cost, if the majority of these costs are generated by fixed assets. Therefore, this is a type of risk which is associated with higher beta. I test QURE’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Given that fixed assets make up less than a third of the company’s total assets, QURE doesn’t rely heavily upon these expensive, inflexible assets to run its business during downturns. Thus, we can expect QURE to be more stable in the face of market movements, relative to its peers of similar size but with a higher portion of fixed assets on their books. Similarly, QURE’s beta value conveys the same message.
What this means for you:
You could benefit from lower risk during times of economic decline by holding onto QURE. Its low fixed cost also means that, in terms of operating leverage, it is relatively flexible during times of economic downturns. In order to fully understand whether QURE is a good investment for you, we also need to consider important company-specific fundamentals such as uniQure’s financial health and performance track record. I highly recommend you to complete your research by taking a look at the following:
- 1. Future Outlook: What are well-informed industry analysts predicting for QURE’s future growth? Take a look at our free research report of analyst consensus for QURE’s outlook.
- 2. Past Track Record: Has QURE 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 QURE’s historicals for more clarity.
- 3. 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.