Advertisement
U.S. markets close in 1 hour 17 minutes
  • S&P 500

    5,249.81
    +1.32 (+0.03%)
     
  • Dow 30

    39,756.43
    -3.65 (-0.01%)
     
  • Nasdaq

    16,367.82
    -31.70 (-0.19%)
     
  • Russell 2000

    2,122.75
    +8.40 (+0.40%)
     
  • Crude Oil

    83.12
    +1.77 (+2.18%)
     
  • Gold

    2,240.70
    +28.00 (+1.27%)
     
  • Silver

    24.95
    +0.20 (+0.82%)
     
  • EUR/USD

    1.0793
    -0.0036 (-0.33%)
     
  • 10-Yr Bond

    4.2040
    +0.0080 (+0.19%)
     
  • dólar/libra

    1.2620
    -0.0018 (-0.14%)
     
  • USD/JPY

    151.3830
    +0.1370 (+0.09%)
     
  • Bitcoin USD

    70,787.91
    +2,086.70 (+3.04%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Nikkei 225

    40,168.07
    -594.66 (-1.46%)
     

Does DevEx Resources Limited (ASX:DEV) Go Up With The Market?

If you are looking to invest in DevEx Resources Limited’s (ASX:DEV), or currently own the stock, then you need to understand its beta in order to understand how it can affect the risk of your portfolio. DEV 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. Different characteristics of a stock expose it to various levels of market risk, and the market as a whole represents a beta value of one. Any stock with a beta of greater than one is considered more volatile than the market, and those with a beta less than one is generally less volatile.

Check out our latest analysis for DevEx Resources

What does DEV’s beta value mean?

DevEx Resources has a beta of 1.65, which means that the percentage change in its stock value will be higher than the entire market in times of booms and busts. A high level of beta means investors face higher risk associated with potential gains and losses driven by market movements. Based on this beta value, DEV will help diversify your portfolio, if it currently comprises of low-beta stocks. This will be beneficial for portfolio returns, in particular, when current market sentiment is positive.

Could DEV’s size and industry cause it to be more volatile?

DEV, with its market capitalisation of AU$6.18M, is a small-cap stock, which generally have higher beta than similar companies of larger size. Furthermore, the company operates in the oil and gas industry, which has been found to have high sensitivity to market-wide shocks. As a result, we should expect higher beta for small-cap stocks in a cyclical industry compared to larger stocks in a defensive industry. This is consistent with DEV’s individual beta value we discussed above. Fundamental factors can also drive the cyclicality of the stock, which we will take a look at next.

ASX:DEV Income Statement Mar 29th 18
ASX:DEV Income Statement Mar 29th 18

How DEV’s assets could affect its 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 DEV’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. Considering fixed assets is virtually non-existent in DEV’s operations, it has low dependency on fixed costs to generate revenue. As a result, the company may be less volatile relative to broad market movements, compared to a company of similar size but higher proportion of fixed assets. However, this is the opposite to what DEV’s actual beta value suggests, which is higher stock volatility relative to the market.

What this means for you:

You may reap the gains of DEV’s returns during times of economic growth by holding the stock. Its low fixed cost also implies that it has the flexibility to adjust its cost to preserve margins during times of a downturn. I recommend analysing the stock in terms of your current portfolio composition before deciding to invest more into DEV. What I have not mentioned in my article here are important company-specific fundamentals such as DevEx Resources’s financial health and performance track record. I urge you to complete your research by taking a look at the following:

  1. Financial Health: Is DEV’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.

  2. Past Track Record: Has DEV 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 DEV’s historicals for more clarity.

  3. 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.

Advertisement