Can Böwe Systec AG (FRA:BSY) Improve Your Portfolio Returns?
For Böwe Systec AG’s (DB:BSY) shareholders, and also potential investors in the stock, understanding how the stock’s risk and return characteristics can impact your portfolio is important. BSY 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 broad market index represents a beta value of one. A stock with a beta greater than one is expected to exhibit higher volatility resulting from market-wide shocks compared to one with a beta below one.
View our latest analysis for Böwe Systec
What does BSY’s beta value mean?
Böwe Systec’s beta of 0.42 indicates that the stock value will be less variable compared to the whole stock market. The stock will exhibit muted movements in both the downside and upside, in response to changing economic conditions, whereas the general market may move by a lot more. BSY’s beta implies it may be a stock that investors with high-beta portfolios might find relevant if they wanted to reduce their exposure to market risk, especially during times of downturns.
Does BSY’s size and industry impact the expected beta?
A market capitalisation of €118.80K puts BSY in the category of small-cap stocks, which tends to possess higher beta than larger companies. Furthermore, the company operates in the electronic industry, which has been found to have high sensitivity to market-wide shocks. Therefore, investors may expect high beta associated with small companies, as well as those operating in the electronic industry, relative to those more well-established firms in a more defensive industry. It seems as though there is an inconsistency in risks portrayed by BSY’s size and industry relative to its actual beta value.
Can BSY’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 BSY’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 BSY’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.
What this means for you:
BSY may be a worthwhile stock to hold onto in order to cushion the impact of a downturn. Depending on the composition of your portfolio, low-beta stocks such as BSY is valuable to lower your risk of market exposure, in particular, during times of economic decline. In order to fully understand whether BSY is a good investment for you, we also need to consider important company-specific fundamentals such as Böwe Systec’s financial health and performance track record. I urge you to complete your research by taking a look at the following:
Financial Health: Is BSY’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
