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Does Market Volatility Impact Lightbridge Corporation’s (NASDAQ:LTBR) Share Price?

Pam Parks

If you own shares in Lightbridge Corporation (NASDAQ:LTBR) 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 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.

Check out our latest analysis for Lightbridge

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What we can learn from LTBR’s beta value

Lightbridge has a five-year beta of 1.03. 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. Using history as a guide, we might surmise that the share price is likely to be influenced by market voltility going forward but it probably won’t be particularly sensitive to it. 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 Lightbridge fares in that regard, below.

NasdaqCM:LTBR Income Statement Export January 18th 19
NasdaqCM:LTBR Income Statement Export January 18th 19

Does LTBR’s size influence the expected beta?

With a market capitalisation of US$20m, Lightbridge is a very small company by global standards. It is quite likely to be unknown to most investors. Companies this small are usually more volatile than the market, whether or not that volatility is correlated. Therefore, it’s a bit surprising to see that this stock has a beta value so close to the overall market.

What this means for you:

Lightbridge has a beta value quite close to that of the overall market. That doesn’t tell us much on its own, so it is probably worth considering whether the company is growing, if you’re looking for stocks that will go up more than the overall market. In order to fully understand whether LTBR is a good investment for you, we also need to consider important company-specific fundamentals such as Lightbridge’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Financial Health: Are LTBR’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.

  2. Past Track Record: Has LTBR 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 LTBR’s historicals for more clarity.

  3. 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.