Can CBANNER INTERNATIONAL Holdings Limited (HKG:1028) Improve Your Portfolio Returns?
For CBANNER INTERNATIONAL Holdings Limited’s (HKG:1028) shareholders, and also potential investors in the stock, understanding how the stock’s risk and return characteristics can impact your portfolio is important. Every stock in the market is exposed to market risk, which arises from macroeconomic factors such as economic growth and geo-political tussles just to name a few. This 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 considered more sensitive to market-wide shocks compared to a stock that trades below the value of one.
View our latest analysis for C.BANNER INTERNATIONAL Holdings
An interpretation of 1028’s beta
C.BANNER INTERNATIONAL Holdings’s beta of 0.84 indicates that the company has a history of less share price volatility than the broader market. This means the stock is more defensive against the ups and downs of a stock market, if historic patterns persist. In the past, the share price has moved by less than the entire market index. 1028’s beta implies it may be a stock that investors with high-beta portfolios might find interesting, if they wanted to reduce their exposure to the risk that a broad market downturn negatively impacts their portfolio.
Could 1028’s size and industry cause it to be more volatile?
A market capitalisation of CN¥1.36b puts 1028 in the category of small-cap stocks, which tends to possess higher beta than larger companies. In addition to size, 1028 also operates in the luxury industry, which has commonly demonstrated strong reactions to market-wide shocks. Therefore, investors may expect high beta associated with small companies, as well as those operating in the luxury industry, relative to those more well-established firms in a more defensive industry. This is an interesting conclusion, since both 1028’s size and industry indicates the stock should have a higher beta than it currently has. There may be a more fundamental driver which can explain this inconsistency, which we will examine below.
Is 1028’s cost structure indicative of a high 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 examine 1028’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. Since 1028’s fixed assets are only 27.79% of its total assets, it doesn’t depend heavily on a high level of these rigid and costly assets to operate its business. 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:
You may reap the benefit of muted movements during times of economic decline by holding onto 1028. Its low fixed cost also means that, in terms of operating leverage, its costs are relatively malleable to preserve margins. In order to fully understand whether 1028 is a good investment for you, we also need to consider important company-specific fundamentals such as C.BANNER INTERNATIONAL Holdings’s financial health and performance track record. I urge you to complete your research by taking a look at the following:
Financial Health: Are 1028’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.
Past Track Record: Has 1028 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 1028’s historicals for more clarity.
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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
