For SA Entreparticulierscom’s (ENXTPA:ALENT) shareholders, and also potential investors in the stock, understanding how the stock’s risk and return characteristics can impact your portfolio is important. Every stock in the market is exposed to market risk, which arises from macroeconomic factors such as economic growth and geo-political tussles just to name a few. This is measured by its beta. Different characteristics of a stock expose it to various levels of market risk, and the market as a whole represents a beta of one. A stock with a beta greater than one is expected to exhibit higher volatility resulting from market-wide shocks compared to one with a beta below one.

Check out our latest analysis for SA Entreparticuliers.com

What does ALENT’s beta value mean?

SA Entreparticuliers.com’s beta of 0.15 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. ALENT’s beta implies it may be a stock that investors with high-beta portfolios might find relevant if they wanted to reduce their exposure to market risk, especially during times of downturns.

Could ALENT’s size and industry cause it to be more volatile?

ALENT, with its market capitalisation of €2.64M, is a small-cap stock, which generally have higher beta than similar companies of larger size. But, ALENT’s industry, media, is considered to be defensive, which means it is less volatile than the market over the economic cycle. As a result, we should expect a high beta for the small-cap ALENT but a low beta for the media industry. It seems as though there is an inconsistency in risks from ALENT’s size and industry. A potential driver of this variance can be a fundamental factor, which we will take a look at next.

Can ALENT’s asset-composition point to a higher 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 ALENT’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Since ALENT’s fixed assets are only 2.21% of its total assets, it doesn’t depend heavily on a high level of these rigid and costly assets to operate its business. 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. This is consistent with is current beta value which also indicates low volatility.