U.S. Markets closed

Does Ultra Clean Holdings, Inc. (NASDAQ:UCTT) Have A Particularly Volatile Share Price?

Simply Wall St

Anyone researching Ultra Clean Holdings, Inc. (NASDAQ:UCTT) 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 category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. The other type, which cannot be diversified away, is the volatility of the entire market. Every stock in the market is exposed to this volatility, which is linked to the fact that stocks prices are correlated in an efficient 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. Any stock with a beta of greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or poorly correlated with the market.

See our latest analysis for Ultra Clean Holdings

What we can learn from UCTT's beta value

With a beta of 1.07, (which is quite close to 1) the share price of Ultra Clean Holdings has historically been about as voltile as the broader market. While history does not always repeat, this may indicate that the stock price will continue to be exposed to market risk, albeit not overly so. Beta is worth considering, but it's also important to consider whether Ultra Clean Holdings is growing earnings and revenue. You can take a look for yourself, below.

NasdaqGS:UCTT Income Statement, July 24th 2019

How does UCTT's size impact its beta?

With a market capitalisation of US$570m, Ultra Clean Holdings is a small cap stock. However, it is big enough to catch the attention of professional investors. Small companies often have a high beta value because the stock price can move on relatively low capital flows. So it's interesting to note that this stock historically has a beta value quite close to one.

What this means for you:

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