Does Inbook Spólka Akcyjna (WSE:INB) Fall With The Market?
For Inbook Spólka Akcyjna’s (WSE:INB) shareholders, and also potential investors in the stock, understanding how the stock’s risk and return characteristics can impact your portfolio is important. Every stock in the market is exposed to market risk, which arises from macroeconomic factors such as economic growth and geo-political tussles just to name a few. This is measured by its beta. Not every stock is exposed to the same level of market risk, and the market as a whole represents a beta 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.
View our latest analysis for Inbook Spólka Akcyjna
What is INB’s market risk?
With a five-year beta of 0.54, Inbook Spólka Akcyjna appears to be a less volatile company compared to the rest of the market. This means that the change in INB’s value, whether it goes up or down, will be of a smaller degree than the change in value of the entire stock market index. INB’s beta indicates it is a stock that investors may find valuable if they want to reduce the overall market risk exposure of their stock portfolio.
Does INB’s size and industry impact the expected beta?
INB, with its market capitalisation of ZŁ2.51M, is a small-cap stock, which generally have higher beta than similar companies of larger size. Furthermore, the company operates in the online retail industry, which has been found to have high sensitivity to market-wide shocks. As a result, we should expect a high beta for the small-cap INB but a low beta for the online retail industry. This is an interesting conclusion, since both INB’s size and industry indicates the stock should have a higher beta than it currently has. A potential driver of this variance can be a fundamental factor, which we will take a look at next.
Is INB’s cost structure indicative of a high beta?
An asset-heavy company tends to have a higher beta because the risk associated with running fixed assets during a downturn is highly expensive. I test INB’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Given that fixed assets make up less than a third of the company’s total assets, INB doesn’t rely heavily upon these expensive, inflexible assets to run its business during downturns. Thus, we can expect INB to be more stable in the face of market movements, relative to its peers of similar size but with a higher portion of fixed assets on their books. Similarly, INB’s beta value conveys the same message.
What this means for you:
You may reap the benefit of muted movements during times of economic decline by holding onto INB. Its low fixed cost also means that, in terms of operating leverage, its costs are relatively malleable to preserve margins. In order to fully understand whether INB is a good investment for you, we also need to consider important company-specific fundamentals such as Inbook Spólka Akcyjna’s financial health and performance track record. I urge you to complete your research by taking a look at the following:
Financial Health: Is INB’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.
Past Track Record: Has INB 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 INB’s historicals for more clarity.
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.
