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If you’re interested in Telenav, Inc. (NASDAQ:TNAV), 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. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the 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 mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. 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.
What does TNAV’s beta value mean to investors?
With a beta of 0.97, (which is quite close to 1) the share price of Telenav has historically been about as voltile as the broader market. Using history as a guide, we might surmise that the share price is likely to be influenced by market voltility going forward but it probably won’t be particularly sensitive to it. 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 Telenav fares in that regard, below.
Could TNAV’s size cause it to be more volatile?
With a market capitalisation of US$301m, Telenav is a very small company by global standards. It is quite likely to be unknown to most investors. Companies this small are usually more volatile than the market, whether or not that volatility is correlated. Therefore, it’s a bit surprising to see that this stock has a beta value so close to the overall market.
What this means for you:
Telenav has a beta value quite close to that of the overall market. That doesn’t tell us much on its own, so it is probably worth considering whether the company is growing, if you’re looking for stocks that will go up more than the overall market. In order to fully understand whether TNAV is a good investment for you, we also need to consider important company-specific fundamentals such as Telenav’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 TNAV’s future growth? Take a look at our free research report of analyst consensus for TNAV’s outlook.
- Past Track Record: Has TNAV 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 TNAV’s historicals for more clarity.
- Other Interesting Stocks: It’s worth checking to see how TNAV 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 firstname.lastname@example.org. 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.