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Does Eagle Bulk Shipping Inc. (NASDAQ:EGLE) Have A Particularly Volatile Share Price?

Simply Wall St
·4 min read

If you're interested in Eagle Bulk Shipping Inc. (NASDAQ:EGLE), 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. 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 mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. 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. Any stock with a beta of greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or poorly correlated with the market.

Check out our latest analysis for Eagle Bulk Shipping

What we can learn from EGLE's beta value

Given that it has a beta of 1.39, we can surmise that the Eagle Bulk Shipping share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that Eagle Bulk Shipping are likely to rise strongly in times of greed, but sell off in times of fear. 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 Eagle Bulk Shipping's revenue and earnings in the image below.

NasdaqGS:EGLE Income Statement, March 2nd 2020
NasdaqGS:EGLE Income Statement, March 2nd 2020

How does EGLE's size impact its beta?

With a market capitalisation of US$254m, Eagle Bulk Shipping is a very small company by global standards. It is quite likely to be unknown to 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 Eagle Bulk Shipping has a reasonably high beta, it's worth considering why it is so heavily influenced by broader market sentiment. For example, it might be a high growth stock or have a lot of operating leverage in its business model. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Eagle Bulk Shipping’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 EGLE’s future growth? Take a look at our free research report of analyst consensus for EGLE’s outlook.

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

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