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Before You Buy LiveRamp Holdings, Inc. (NYSE:RAMP), Consider Its Volatility

Simply Wall St

If you're interested in LiveRamp Holdings, Inc. (NYSE:RAMP), 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. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. 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 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated 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.

Check out our latest analysis for LiveRamp Holdings

What does RAMP's beta value mean to investors?

Zooming in on LiveRamp Holdings, we see it has a five year beta of 1.39. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. If this beta value holds true in the future, LiveRamp Holdings shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Beta is worth considering, but it's also important to consider whether LiveRamp Holdings is growing earnings and revenue. You can take a look for yourself, below.

NYSE:RAMP Income Statement, November 22nd 2019

Could RAMP's size cause it to be more volatile?

LiveRamp Holdings is a reasonably big company, with a market capitalisation of US$3.3b. Most companies this size are actively traded with decent volumes of shares changing hands each day. It has a relatively high beta, suggesting it may be somehow leveraged to macroeconomic conditions. For example, it might be a high growth stock with lots of investors trading the shares. It's notable when large companies to have high beta values, because it usually takes substantial capital flows to move their share prices.

What this means for you:

Beta only tells us that the LiveRamp Holdings share price is sensitive to broader market movements. This could indicate that it is a high growth company, or is heavily influenced by sentiment because it is speculative. Alternatively, it could have operating leverage in its business model. Ultimately, beta is an interesting metric, but there's plenty more to learn. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as LiveRamp Holdings’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 RAMP’s future growth? Take a look at our free research report of analyst consensus for RAMP’s outlook.
  2. Past Track Record: Has RAMP 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 RAMP's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how RAMP 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.