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Does The Hooker Furniture Corporation (NASDAQ:HOFT) Share Price Fall With The Market?

Simply Wall St

If you own shares in Hooker Furniture Corporation (NASDAQ:HOFT) 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 type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.

Some stocks mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. 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. 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.

See our latest analysis for Hooker Furniture

What does HOFT's beta value mean to investors?

Given that it has a beta of 0.90, we can surmise that the Hooker Furniture share price has not been strongly impacted by broader market volatility (over the last 5 years). This means that -- if history is a guide -- buying the stock would reduce the impact of overall market volatility in many portfolios (depending on the beta of the portfolio, of course). Beta is worth considering, but it's also important to consider whether Hooker Furniture is growing earnings and revenue. You can take a look for yourself, below.

NasdaqGS:HOFT Income Statement April 27th 2020

Could HOFT's size cause it to be more volatile?

Hooker Furniture is a rather small company. It has a market capitalisation of US$166m, which means it is probably under the radar of most investors. 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:

Since Hooker Furniture is not heavily influenced by market moves, its share price is probably far more dependent on company specific developments. It could pay to take a closer look at metrics such as revenue growth, earnings growth, and debt. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Hooker Furniture’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 HOFT’s future growth? Take a look at our free research report of analyst consensus for HOFT’s outlook.
  2. Past Track Record: Has HOFT 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 HOFT's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how HOFT 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.