U.S. Markets open in 5 hrs 30 mins

Does High Arctic Energy Services Inc (TSE:HWO) Have A Volatile Share Price?

Simply Wall St

Anyone researching High Arctic Energy Services Inc (TSE:HWO) might want to consider the historical volatility of the share price. 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 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 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 High Arctic Energy Services

What does HWO's beta value mean to investors?

Zooming in on High Arctic Energy Services, we see it has a five year beta of 1.7. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. If the past is any guide, we would expect that High Arctic Energy Services shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. Beta is worth considering, but it's also important to consider whether High Arctic Energy Services is growing earnings and revenue. You can take a look for yourself, below.

TSX:HWO Income Statement, July 29th 2019

How does HWO's size impact its beta?

High Arctic Energy Services is a rather small company. It has a market capitalisation of CA$159m, which means it is probably under the radar of most investors. It takes less money to influence the share price of a very small company. This may explain the excess volatility implied by this beta value.

What this means for you:

Since High Arctic Energy Services tends to moves up when the market is going up, and down when it's going down, potential investors may wish to reflect on the overall market, when considering the stock. In order to fully understand whether HWO is a good investment for you, we also need to consider important company-specific fundamentals such as High Arctic Energy Services’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Future Outlook: What are well-informed industry analysts predicting for HWO’s future growth? Take a look at our free research report of analyst consensus for HWO’s outlook.
  2. Past Track Record: Has HWO 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 HWO's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how HWO 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.