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Before You Buy GenMark Diagnostics, Inc. (NASDAQ:GNMK), Consider Its Volatility

Simply Wall St

If you're interested in GenMark Diagnostics, Inc. (NASDAQ:GNMK), 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. First, we have company specific volatility, which is the price gyrations of an individual stock. Holding at least 8 stocks can reduce this kind of risk across a portfolio. The second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the 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 below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.

See our latest analysis for GenMark Diagnostics

What GNMK's beta value tells investors

Zooming in on GenMark Diagnostics, we see it has a five year beta of 1.27. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. Based on this history, investors should be aware that GenMark Diagnostics are likely to rise strongly in times of greed, but sell off in times of fear. 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 GenMark Diagnostics fares in that regard, below.

NasdaqGM:GNMK Income Statement, August 19th 2019

How does GNMK's size impact its beta?

With a market capitalisation of US$373m, GenMark Diagnostics is a very small company by global standards. It is quite likely to be unknown to most investors. 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 GenMark Diagnostics 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. In order to fully understand whether GNMK is a good investment for you, we also need to consider important company-specific fundamentals such as GenMark Diagnostics’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

  1. Future Outlook: What are well-informed industry analysts predicting for GNMK’s future growth? Take a look at our free research report of analyst consensus for GNMK’s outlook.
  2. Past Track Record: Has GNMK 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 GNMK's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how GNMK measures up against other companies on valuation. You could start with this free list of prospective options.

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.

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. Thank you for reading.