Does County Bancorp, Inc. (NASDAQ:ICBK) Have A Volatile Share Price?
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Anyone researching County Bancorp, Inc. (NASDAQ:ICBK) might want to consider the historical volatility of the share price. 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 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. Beta can be a useful tool to understand how much a stock is influenced by market risk (volatility). However, Warren Buffett said ‘volatility is far from synonymous with risk’ in his 2014 letter to investors. So, while useful, beta is not the only metric to consider. To use beta as an investor, you must first understand that the overall market has a beta of 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 County Bancorp
What does ICBK’s beta value mean to investors?
Given that it has a beta of 0.81, we can surmise that the County Bancorp share price has not been strongly impacted by broader market volatility (over the last 5 years). This suggests that including it in your portfolio will reduce volatility arising from broader market movements, assuming your portfolio’s weighted average beta is higher than 0.81. Beta is worth considering, but it’s also important to consider whether County Bancorp is growing earnings and revenue. You can take a look for yourself, below.
Could ICBK’s size cause it to be more volatile?
County Bancorp is a noticeably small company, with a market capitalisation of US$113m. Most companies this size are not always actively traded. It is not unusual for very small companies to have a low beta value, especially if only low volumes of shares are traded. Even when they are traded more actively, the share price is often more susceptible to company specific developments than overall market volatility.
What this means for you:
The County Bancorp doesn’t usually show much sensitivity to the broader market. This could be for a variety of reasons. Typically, smaller companies have a low beta if their share price tends to move a lot due to company specific developments. Alternatively, an strong dividend payer might move less than the market because investors are valuing it for its income stream. In order to fully understand whether ICBK is a good investment for you, we also need to consider important company-specific fundamentals such as County Bancorp’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
Future Outlook: What are well-informed industry analysts predicting for ICBK’s future growth? Take a look at our free research report of analyst consensus for ICBK’s outlook.
Past Track Record: Has ICBK 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 ICBK’s historicals for more clarity.
Other Interesting Stocks: It’s worth checking to see how ICBK measures up against other companies on valuation. You could start with this free list of prospective options.
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.
