U.S. Markets open in 8 hrs 15 mins

Does BE Semiconductor Industries N.V. (AMS:BESI) Have A High Beta?

Simply Wall St

Want to participate in a research study? Help shape the future of investing tools and earn a $60 gift card!

Anyone researching BE Semiconductor Industries N.V. (AMS:BESI) 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 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. 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.

View our latest analysis for BE Semiconductor Industries

What we can learn from BESI's beta value

Looking at the last five years, BE Semiconductor Industries has a beta of 1.34. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. Based on this history, investors should be aware that BE Semiconductor Industries 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 BE Semiconductor Industries fares in that regard, below.

ENXTAM:BESI Income Statement, April 1st 2019

Does BESI's size influence the expected beta?

BE Semiconductor Industries is a small cap stock with a market capitalisation of €1.7b. Most companies this size are actively traded. It has a relatively high beta, which is not unusual among small-cap stocks. Because it takes less capital to move the share price of a smaller company, actively traded small-cap stocks often have a higher beta that a similar large-cap stock.

What this means for you:

Beta only tells us that the BE Semiconductor Industries share price is sensitive to broader market movements. This could indicate that it is a high growth company, or is heavily influenced by sentiment because it is speculative. Alternatively, it could have operating leverage in its business model. Ultimately, beta is an interesting metric, but there's plenty more to learn. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as BE Semiconductor Industries’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 BESI’s future growth? Take a look at our free research report of analyst consensus for BESI’s outlook.
  2. Past Track Record: Has BESI 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 BESI's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how BESI measures up against other companies on valuation. You could start with this free list of prospective options.

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.

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.