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Before You Buy Stratasys Ltd. (NASDAQ:SSYS), Consider Its Volatility

Simply Wall St
·3 mins read

Anyone researching Stratasys Ltd. (NASDAQ:SSYS) might want to consider the historical volatility of the share price. 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 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 mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. Beta can be a useful tool to understand how much a stock is influenced by market risk (volatility). However, Warren Buffett said 'volatility is far from synonymous with risk' in his 2014 letter to investors. So, while useful, beta is not the only metric to consider. To use beta as an investor, you must first understand that the overall market has a beta of one. Any stock with a beta of greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or poorly correlated with the market.

Check out our latest analysis for Stratasys

What SSYS's beta value tells investors

Given that it has a beta of 1.66, we can surmise that the Stratasys share price has been fairly sensitive to market volatility (over the last 5 years). If this beta value holds true in the future, Stratasys 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 Stratasys is growing earnings and revenue. You can take a look for yourself, below.

NasdaqGS:SSYS Income Statement April 9th 2020
NasdaqGS:SSYS Income Statement April 9th 2020

How does SSYS's size impact its beta?

Stratasys is a small cap stock with a market capitalisation of US$848m. Most companies this size are actively traded. It's not particularly surprising that it has a higher beta than the overall market. That's because it takes less money to influence the share price of a smaller company, than a bigger company.

What this means for you:

Since Stratasys has a reasonably high beta, it's worth considering why it is so heavily influenced by broader market sentiment. For example, it might be a high growth stock or have a lot of operating leverage in its business model. In order to fully understand whether SSYS is a good investment for you, we also need to consider important company-specific fundamentals such as Stratasys’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 SSYS’s future growth? Take a look at our free research report of analyst consensus for SSYS’s outlook.

  2. Past Track Record: Has SSYS 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 SSYS's historicals for more clarity.

  3. Other Interesting Stocks: It's worth checking to see how SSYS 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.