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How Does Adtalem Global Education Inc. (NYSE:ATGE) Affect Your Portfolio Volatility?

Simply Wall St
·3 mins read

If you own shares in Adtalem Global Education Inc. (NYSE:ATGE) then it's worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. The first category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. The other type, which cannot be diversified away, is the volatility of the entire market. Every stock in the market is exposed to this volatility, which is linked to the fact that stocks prices are correlated in an efficient market.

Some stocks are more sensitive to general market forces than others. 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 greater than one is more sensitive to broader market movements than a stock with a beta of less than one.

View our latest analysis for Adtalem Global Education

What ATGE's beta value tells investors

Given this level of beta, if the future looks like the past, we could therefore consider it likely that the stock price will experience share price volatility that is roughly similar to the overall market. Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see Adtalem Global Education's revenue and earnings in the image below.

NYSE:ATGE Income Statement, February 11th 2020
NYSE:ATGE Income Statement, February 11th 2020

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

Adtalem Global Education is a small cap stock with a market capitalisation of US$1.7b. Most companies this size are actively traded.

What this means for you:

Since Adtalem Global Education has a beta close to one, it will probably show a positive return when the market is moving up, based on history. If you're trying to generate better returns than the market, it would be worth thinking about other metrics such as cashflows, dividends and revenue growth might be a more useful guide to the future. In order to fully understand whether ATGE is a good investment for you, we also need to consider important company-specific fundamentals such as Adtalem Global Education’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 ATGE’s future growth? Take a look at our free research report of analyst consensus for ATGE’s outlook.

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

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