If you are a shareholder in Nymox Pharmaceutical Corporation’s (NASDAQ:NYMX), or are thinking about investing in the company, knowing how it contributes to the risk and reward profile of your portfolio is important. NYMX is exposed to market-wide risk, which arises from investing in the stock market. This risk reflects changes in economic and political factors that affects all stocks, and is measured by its beta. Not every stock is exposed to the same level of market risk, and the market as a whole represents a beta value of one. A stock with a beta greater than one is considered more sensitive to market-wide shocks compared to a stock that trades below the value of one.
Check out our latest analysis for Nymox Pharmaceutical
An interpretation of NYMX’s beta
With a five-year beta of 0.85, Nymox Pharmaceutical appears to be a less volatile company compared to the rest of the market. This means the stock is more defensive against the ups and downs of a stock market, moving by less than the entire market index in times of change. NYMX’s beta indicates it is a stock that investors may find valuable if they want to reduce the overall market risk exposure of their stock portfolio.
Could NYMX’s size and industry cause it to be more volatile?
With a market cap of USD $197.95M, NYMX falls within the small-cap spectrum of stocks, which are found to experience higher relative risk compared to larger companies. Conversely, the company operates in the biotechnology industry, which has been found to have low sensitivity to market-wide shocks. Therefore, investors can expect a high beta associated with the size of NYMX, but a lower beta given the nature of the industry it operates in. It seems as though there is an inconsistency in risks from NYMX’s size and industry. A potential driver of this variance can be a fundamental factor, which we will take a look at next.
Can NYMX’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 NYMX’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Considering fixed assets is virtually non-existent in NYMX’s operations, it has low dependency on fixed costs to generate revenue. 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.