U.S. Markets closed

Does Werner Enterprises, Inc. (NASDAQ:WERN) Have A Particularly Volatile Share Price?

Simply Wall St

If you're interested in Werner Enterprises, Inc. (NASDAQ:WERN), then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. Some investors use beta as a measure of how much a certain stock is impacted by market risk (volatility). While we should keep in mind that Warren Buffett has cautioned that 'Volatility is far from synonymous with risk', beta is still a useful factor to consider. To make good use of it you must first know 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 Werner Enterprises

What we can learn from WERN's beta value

Given that it has a beta of 1.34, we can surmise that the Werner Enterprises share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that Werner Enterprises 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 Werner Enterprises fares in that regard, below.

NasdaqGS:WERN Income Statement, November 6th 2019

Could WERN's size cause it to be more volatile?

Werner Enterprises is a fairly large company. It has a market capitalisation of US$2.6b, which means it is probably on the radar of most investors. It takes deep pocketed investors to influence the share price of a large company, so it's a little unusual to see companies this size with high beta values. It may be that that this company is more heavily impacted by broader economic factors than most.

What this means for you:

Since Werner Enterprises has a reasonably high beta, it's worth considering why it is so heavily influenced by broader market sentiment. For example, it might be a high growth stock or have a lot of operating leverage in its business model. In order to fully understand whether WERN is a good investment for you, we also need to consider important company-specific fundamentals such as Werner Enterprises’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 WERN’s future growth? Take a look at our free research report of analyst consensus for WERN’s outlook.
  2. Past Track Record: Has WERN 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 WERN's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how WERN 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.