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Does The the Rubicon Project, Inc. (NYSE:RUBI) Share Price Fall With The Market?

Simply Wall St

Anyone researching the Rubicon Project, Inc. (NYSE:RUBI) 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. 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. 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 Rubicon Project

What does RUBI's beta value mean to investors?

Given that it has a beta of 1.67, we can surmise that the Rubicon Project share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that Rubicon Project are likely to rise strongly in times of greed, but sell off in times of fear. 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 Rubicon Project fares in that regard, below.

NYSE:RUBI Income Statement, January 14th 2020

How does RUBI's size impact its beta?

Rubicon Project is a small company, but not tiny and little known. It has a market capitalisation of US$565m, which means it would be on the radar of intstitutional investors. It is quite common to see a small-cap stock with a beta greater than one. In part, that's because relatively few investors can influence the price of a smaller company, compared to a large company.

What this means for you:

Since Rubicon Project 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 RUBI is a good investment for you, we also need to consider important company-specific fundamentals such as Rubicon Project’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 RUBI’s future growth? Take a look at our free research report of analyst consensus for RUBI’s outlook.
  2. Past Track Record: Has RUBI 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 RUBI's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how RUBI 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.