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Does Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE:HASI) Have A High Beta?

Simply Wall St

If you own shares in Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE:HASI) 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. 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 second sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all stocks on the market.

Some stocks mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. Beta is a widely used metric to measure a stock's exposure to market risk (volatility). Before we go on, it's worth noting that Warren Buffett pointed out in his 2014 letter to shareholders that 'volatility is far from synonymous with risk.' Having said that, beta can still be rather useful. The first thing to understand about beta is 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 Hannon Armstrong Sustainable Infrastructure Capital

What does HASI's beta value mean to investors?

Hannon Armstrong Sustainable Infrastructure Capital has a five-year beta of 1.05. This is reasonably close to the market beta of 1, so the stock has in the past displayed similar levels of volatility to the overall market. While history does not always repeat, this may indicate that the stock price will continue to be exposed to market risk, albeit not overly so. Share price volatility is well worth considering, but most long term investors consider the history of revenue and earnings growth to be more important. Take a look at how Hannon Armstrong Sustainable Infrastructure Capital fares in that regard, below.

NYSE:HASI Income Statement, November 7th 2019

How does HASI's size impact its beta?

With a market capitalisation of US$1.9b, Hannon Armstrong Sustainable Infrastructure Capital is a small cap stock. However, it is big enough to catch the attention of professional investors. It takes less capital to move the share price of small companies, and they are also more impacted by company specific events, so it's a bit of a surprise that the beta is so close to the overall market.

What this means for you:

It is probable that there is a link between the share price of Hannon Armstrong Sustainable Infrastructure Capital and the broader market, since it has a beta value quite close to one. However, long term investors are generally well served by looking past market volatility and focussing on the underlying development of the business. If that's your game, metrics such as revenue, earnings and cash flow will be more useful. In order to fully understand whether HASI is a good investment for you, we also need to consider important company-specific fundamentals such as Hannon Armstrong Sustainable Infrastructure Capital’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 HASI’s future growth? Take a look at our free research report of analyst consensus for HASI’s outlook.
  2. Past Track Record: Has HASI 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 HASI's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how HASI measures up against other companies on valuation. You could start with this free list of prospective options.

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.

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. Thank you for reading.