Does Natural Grocers by Vitamin Cottage, Inc. (NYSE:NGVC) Have A Particularly Volatile Share Price?
Anyone researching Natural Grocers by Vitamin Cottage, Inc. (NYSE:NGVC) might want to consider the historical volatility of the share price. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the 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 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 below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.
See our latest analysis for Natural Grocers by Vitamin Cottage
What we can learn from NGVC's beta value
Natural Grocers by Vitamin Cottage has a five-year beta of 1.06. 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. Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see Natural Grocers by Vitamin Cottage's revenue and earnings in the image below.
Could NGVC's size cause it to be more volatile?
Natural Grocers by Vitamin Cottage is a noticeably small company, with a market capitalisation of US$267m. Most companies this size are not always actively traded. It doesn't take much money to really move the share price of a company as small as this one. That makes it somewhat unusual that it has a beta value so close to the overall market.
What this means for you:
Natural Grocers by Vitamin Cottage 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. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Natural Grocers by Vitamin Cottage’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
Future Outlook: What are well-informed industry analysts predicting for NGVC’s future growth? Take a look at our free research report of analyst consensus for NGVC’s outlook.
Past Track Record: Has NGVC 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 NGVC's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how NGVC measures up against other companies on valuation. You could start with this free list of prospective options.
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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.
