Anyone researching Genomic Vision Société Anonyme (EPA:GV) might want to consider the historical volatility of the share price. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. 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 sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all stocks on the market.
Some stocks are more sensitive to general market forces than others. Beta is a widely used metric to measure a stock's exposure to market risk (volatility). Before we go on, it's worth noting that Warren Buffett pointed out in his 2014 letter to shareholders that 'volatility is far from synonymous with risk.' Having said that, beta can still be rather useful. The first thing to understand about beta is that the beta of the overall market is one. A stock with a beta greater than one is more sensitive to broader market movements than a stock with a beta of less than one.
Check out our latest analysis for Genomic Vision Société Anonyme
What GV's beta value tells investors
Zooming in on Genomic Vision Société Anonyme, we see it has a five year beta of 1.31. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. If this beta value holds true in the future, Genomic Vision Société Anonyme shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see Genomic Vision Société Anonyme's revenue and earnings in the image below.
How does GV's size impact its beta?
Genomic Vision Société Anonyme is a rather small company. It has a market capitalisation of €12m, which means it is probably under the radar of most investors. Relatively few investors can influence the price of a smaller company, compared to a large company. This could explain the high beta value, in this case.
What this means for you:
Since Genomic Vision Société Anonyme has a reasonably high beta, it's worth considering why it is so heavily influenced by broader market sentiment. For example, it might be a high growth stock or have a lot of operating leverage in its business model. In order to fully understand whether GV is a good investment for you, we also need to consider important company-specific fundamentals such as Genomic Vision Société Anonyme’s financial health and performance track record. I urge you to continue your research by taking a look at the following: