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Is American Public Education, Inc. (NASDAQ:APEI) A Volatile Stock?

Simply Wall St
·3 min read

If you're interested in American Public Education, Inc. (NASDAQ:APEI), then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. The first category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. The other type, which cannot be diversified away, is the volatility of the entire market. Every stock in the market is exposed to this volatility, which is linked to the fact that stocks prices are correlated in an efficient 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.

See our latest analysis for American Public Education

What we can learn from APEI's beta value

While history does not always repeat, this level of beta may indicate that the stock price will continue to be exposed to market risk, albeit not overly so. Beta is worth considering, but it's also important to consider whether American Public Education is growing earnings and revenue. You can take a look for yourself, below.

NasdaqGS:APEI Income Statement, March 12th 2020
NasdaqGS:APEI Income Statement, March 12th 2020

Does APEI's size influence the expected beta?

American Public Education is a noticeably small company, with a market capitalisation of US$306m. Most companies this size are not always actively traded. Companies this small are usually more volatile than the market, whether or not that volatility is correlated. Therefore, it's a bit surprising to see that this stock has a beta value so close to the overall market.

What this means for you:

Since American Public Education has a beta close to one, it will probably show a positive return when the market is moving up, based on history. If you're trying to generate better returns than the market, it would be worth thinking about other metrics such as cashflows, dividends and revenue growth might be a more useful guide to the future. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as American Public Education’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Future Outlook: What are well-informed industry analysts predicting for APEI’s future growth? Take a look at our free research report of analyst consensus for APEI’s outlook.

  2. Past Track Record: Has APEI been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of APEI's historicals for more clarity.

  3. Other Interesting Stocks: It's worth checking to see how APEI measures up against other companies on valuation. You could start with this free list of prospective options.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.