Does Bucher Industries AG (VTX:BUCN) Go Up With The Market?
If you are a shareholder in Bucher Industries AG’s (SWX:BUCN), or are thinking about investing in the company, knowing how it contributes to the risk and reward profile of your portfolio is important. BUCN is exposed to market-wide risk, which arises from investing in the stock market. This risk reflects changes in economic and political factors that affects all stocks, and is measured by its beta. Not all stocks are expose 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 expected to exhibit higher volatility resulting from market-wide shocks compared to one with a beta below one.
See our latest analysis for Bucher Industries
What is BUCN’s market risk?
With a five-year beta of 0.85, Bucher Industries appears to be a less volatile company compared to the rest of the market. This means that the change in BUCN’s value, whether it goes up or down, will be of a smaller degree than the change in value of the entire stock market index. BUCN’s beta implies it may be a stock that investors with high-beta portfolios might find relevant if they wanted to reduce their exposure to market risk, especially during times of downturns.
How does BUCN’s size and industry impact its risk?
BUCN has a market capitalization of CHF3.84B, putting it in the category of established companies, which are found to experience less relative risk compared to small-sized companies. However, BUCN operates in the machinery industry, which has commonly demonstrated strong reactions to market-wide shocks. Therefore, investors can expect a low beta associated with the size of BUCN, but a higher beta given the nature of the industry it operates in. It seems as though there is an inconsistency in risks from BUCN’s size and industry. A potential driver of this variance can be a fundamental factor, which we will take a look at next.
Is BUCN’s cost structure indicative of a high beta?
During times of economic downturn, low demand may cause companies to readjust production of their goods and services. It is more difficult for companies to lower their cost, if the majority of these costs are generated by fixed assets. Therefore, this is a type of risk which is associated with higher beta. I examine BUCN’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. Given a fixed to total assets ratio of over 30%, BUCN seems to be a company which invests a big chunk of its capital on assets that cannot be scaled down on short-notice. As a result, this aspect of BUCN indicates a higher beta than a similar size company with a lower portion of fixed assets on their balance sheet. This outcome contradicts BUCN’s current beta value which indicates a below-average volatility.
What this means for you:
BUCN may be a worthwhile stock to hold onto in order to cushion the impact of a downturn. Depending on the composition of your portfolio, low-beta stocks such as BUCN is valuable to lower your risk of market exposure, in particular, during times of economic decline. In order to fully understand whether BUCN is a good investment for you, we also need to consider important company-specific fundamentals such as Bucher Industries’s financial health and performance track record. I urge you to complete your research by taking a look at the following:
Future Outlook: What are well-informed industry analysts predicting for BUCN’s future growth? Take a look at our free research report of analyst consensus for BUCN’s outlook.
Past Track Record: Has BUCN 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 BUCN’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 pass 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.
