If you are looking to invest in Stampede Capital Ltd’s (NSEI:SCAPDVR), or currently own the stock, then you need to understand its beta in order to understand how it can affect the risk of your portfolio. The beta measures SCAPDVR’s exposure to the wider market risk, which reflects changes in economic and political factors. Not all stocks are expose to the same level of market risk, and the market as a whole represents a beta 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.
View our latest analysis for Stampede Capital
What does SCAPDVR’s beta value mean?
Stampede Capital’s five-year beta of 1.57 means that the company’s value will swing up by more than the market during prosperous times, but also drop down by more in times of downturns. This level of volatility indicates bigger risk for investors who passively invest in the stock market index. According to this value of beta, SCAPDVR can help magnify your portfolio return, especially if it is predominantly made up of low-beta stocks. If the market is going up, a higher exposure to the upside from a high-beta stock can push up your portfolio return.
Does SCAPDVR’s size and industry impact the expected beta?
A market capitalisation of ₹1.21B puts SCAPDVR in the category of small-cap stocks, which tends to possess higher beta than larger companies. In addition to size, SCAPDVR also operates in the capital markets industry, which has commonly demonstrated strong reactions to market-wide shocks. Therefore, investors may expect high beta associated with small companies, as well as those operating in the capital markets industry, relative to those more well-established firms in a more defensive industry. This supports our interpretation of SCAPDVR’s beta value discussed above. Next, we will examine the fundamental factors which can cause cyclicality in the stock.
Is SCAPDVR’s cost structure indicative of a high 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 examine SCAPDVR’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. Considering fixed assets account for less than a third of the company’s overall assets, SCAPDVR seems to have a smaller dependency on fixed costs to generate revenue. As a result, the company may be less volatile relative to broad market movements, compared to a company of similar size but higher proportion of fixed assets. However, this is the opposite to what SCAPDVR’s actual beta value suggests, which is higher stock volatility relative to the market.