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CVB Financial Corp. (NASDAQ:CVBF): What Does Its Beta Value Mean For Your Portfolio?

Simply Wall St

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If you're interested in CVB Financial Corp. (NASDAQ:CVBF), 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 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 are more sensitive to general market forces than others. Beta is a widely used metric to measure a stock's exposure to market risk (volatility). Before we go on, it's worth noting that Warren Buffett pointed out in his 2014 letter to shareholders that 'volatility is far from synonymous with risk.' Having said that, beta can still be rather useful. The first thing to understand about beta is that the beta of the overall market is one. A stock with a beta greater than one is more sensitive to broader market movements than a stock with a beta of less than one.

See our latest analysis for CVB Financial

What we can learn from CVBF's beta value

Looking at the last five years, CVB Financial has a beta of 1.13. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. Based on this history, investors should be aware that CVB Financial are likely to rise strongly in times of greed, but sell off in times of fear. Beta is worth considering, but it's also important to consider whether CVB Financial is growing earnings and revenue. You can take a look for yourself, below.

NasdaqGS:CVBF Income Statement, May 13th 2019

Does CVBF's size influence the expected beta?

CVB Financial is a fairly large company. It has a market capitalisation of US$3.0b, which means it is probably on the radar of most investors. It takes a lot of money to influence the share price of large companies like this one. That makes it interesting to note that its share price has a history of sensitivity to market volatility. There might be some aspect of the business that means profits are leveraged to the economic cycle.

What this means for you:

Beta only tells us that the CVB Financial 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. In order to fully understand whether CVBF is a good investment for you, we also need to consider important company-specific fundamentals such as CVB Financial’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 CVBF’s future growth? Take a look at our free research report of analyst consensus for CVBF’s outlook.
  2. Past Track Record: Has CVBF 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 CVBF's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how CVBF 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.