For Mondo TV France Société Anonyme’s (BIT:MTF) shareholders, and also potential investors in the stock, understanding how the stock’s risk and return characteristics can impact your portfolio is important. The beta measures MTF’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 broad market index 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 Mondo TV France Société Anonyme
An interpretation of MTF’s beta
With a beta of 1.96, Mondo TV France Société Anonyme is a stock that tends to experience more gains than the market during a growth phase and also a bigger reduction in value compared to the market during a broad downturn. Based on this beta value, MTF may be a stock for investors with a portfolio mainly made up of low-beta stocks. This is because during times of bullish sentiment, you can reap more of the upside with high-beta stocks compared to muted movements of low-beta holdings.
Could MTF’s size and industry cause it to be more volatile?
With a market cap of €8.87M, MTF falls within the small-cap spectrum of stocks, which are found to experience higher relative risk compared to larger companies. However, MTF operates in the media industry, which has commonly demonstrated muted reactions to market-wide shocks. As a result, we should expect a high beta for the small-cap MTF but a low beta for the media industry. This is an interesting conclusion, since its industry suggests MTF should be less volatile than it actually is. There may be a more fundamental driver which can explain this inconsistency, which we will examine below.
Can MTF’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 MTF’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 an insignificant portion of total assets, MTF doesn’t rely heavily upon these expensive, inflexible assets to run its business during downturns. Thus, we can expect MTF 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 outcome contradicts MTF’s current beta value which indicates an above-average volatility.