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Does Adaptimmune Therapeutics plc (NASDAQ:ADAP) Have A Particularly Volatile Share Price?

Simply Wall St

If you’re interested in Adaptimmune Therapeutics plc (NASDAQ:ADAP), 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 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. 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 Adaptimmune Therapeutics

What ADAP’s beta value tells investors

Zooming in on Adaptimmune Therapeutics, we see it has a five year beta of 1.3. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market the market. Based on this history, investors should be aware that Adaptimmune Therapeutics 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 Adaptimmune Therapeutics is growing earnings and revenue. You can take a look for yourself, below.

NasdaqGS:ADAP Income Statement, March 15th 2019

Could ADAP’s size cause it to be more volatile?

Adaptimmune Therapeutics is a rather small company. It has a market capitalisation of US$411m, which means it is probably under the radar of most investors. Relatively few investors can influence the price of a smaller company, compared to a large company. This could explain the high beta value, in this case.

What this means for you:

Since Adaptimmune Therapeutics 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 ADAP is a good investment for you, we also need to consider important company-specific fundamentals such as Adaptimmune Therapeutics’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 ADAP’s future growth? Take a look at our free research report of analyst consensus for ADAP’s outlook.
  2. Past Track Record: Has ADAP 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 ADAP’s historicals for more clarity.
  3. Other Interesting Stocks: It’s worth checking to see how ADAP 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.