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Anyone researching METabolic EXplorer S.A. (EPA:METEX) 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 mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. Some investors use beta as a measure of how much a certain stock is impacted by market risk (volatility). While we should keep in mind that Warren Buffett has cautioned that 'Volatility is far from synonymous with risk', beta is still a useful factor to consider. To make good use of it you must first know 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.
View our latest analysis for METabolic EXplorer
What does METEX's beta value mean to investors?
Looking at the last five years, METabolic EXplorer has a beta of 1.26. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. If the past is any guide, we would expect that METabolic EXplorer shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. Share price volatility is well worth considering, but most long term investors consider the history of revenue and earnings growth to be more important. Take a look at how METabolic EXplorer fares in that regard, below.
How does METEX's size impact its beta?
METabolic EXplorer is a noticeably small company, with a market capitalisation of €37m. Most companies this size are not always actively traded. It has a relatively high beta, suggesting it is fairly actively traded for a company of its size. Because it takes less capital to move the share price of a small company like this, when a stock this size is actively traded it is quite often more sensitive to market volatility than similar large companies.
What this means for you:
Since METabolic EXplorer tends to moves up when the market is going up, and down when it's going down, potential investors may wish to reflect on the overall market, when considering the stock. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as METabolic EXplorer’s financial health and performance track record. I urge you to continue your research by taking a look at the following: