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If you are a shareholder in Batenburg Techniek NV.’s (ENXTAM:BATEN), or are thinking about investing in the company, knowing how it contributes to the risk and reward profile of your portfolio is important. The beta measures BATEN’s exposure to the wider market risk, which reflects changes in economic and political factors. Different characteristics of a stock expose it to various levels of market risk, and the market as a whole represents a beta value of one. Any stock with a beta of greater than one is considered more volatile than the market, and those with a beta less than one is generally less volatile.
See our latest analysis for Batenburg Techniek
What does BATEN’s beta value mean?
Batenburg Techniek’s beta of 0.51 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. Based on this beta value, BATEN appears to be a stock that an investor with a high-beta portfolio would look for to reduce risk exposure to the market.
Does BATEN’s size and industry impact the expected beta?
A market capitalisation of €93.44M puts BATEN in the category of small-cap stocks, which tends to possess higher beta than larger companies. Furthermore, the company operates in the construction industry, which has been found to have high sensitivity to market-wide shocks. As a result, we should expect a high beta for the small-cap BATEN but a low beta for the construction industry. This is an interesting conclusion, since both BATEN’s size and industry indicates the stock should have a higher beta than it currently has. A potential driver of this variance can be a fundamental factor, which we will take a look at next.
Is BATEN’s cost structure indicative of a high beta?
An asset-heavy company tends to have a higher beta because the risk associated with running fixed assets during a downturn is highly expensive. I test BATEN’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Since BATEN’s fixed assets are only 23.41% of its total assets, it doesn’t depend heavily on a high level of these rigid and costly assets to operate its business. Thus, we can expect BATEN 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. This is consistent with is current beta value which also indicates low volatility.