Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Anyone researching Südzucker AG (FRA:SZU) 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 sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all 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. 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.
What does SZU's beta value mean to investors?
Looking at the last five years, Südzucker has a beta of 0.81. The fact that this is well below 1 indicates that its share price movements haven't historically been very sensitive to overall market volatility. This suggests that including it in your portfolio will reduce volatility arising from broader market movements, assuming your portfolio's weighted average beta is higher than 0.81. 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 Südzucker's revenue and earnings in the image below.
How does SZU's size impact its beta?
Südzucker is a reasonably big company, with a market capitalisation of €2.8b. Most companies this size are actively traded with decent volumes of shares changing hands each day. When large companies like this one have a low beta value, there is usually some other factor that is having an outsized impact on the share price. For example, a business with significant fixed regulated assets might earn a reasonably predictable return, regardless of broader macroeconomic factors. Alternatively, lumpy earnings might mean minimal share price correlation with the broader market.
What this means for you:
Since Südzucker is not heavily influenced by market moves, its share price is probably far more dependend on company specific developments. It could pay to take a closer look at metrics such as revenue growth, earnings growth, and debt. In order to fully understand whether SZU is a good investment for you, we also need to consider important company-specific fundamentals such as Südzucker’s financial health and performance track record. I urge you to continue your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for SZU’s future growth? Take a look at our free research report of analyst consensus for SZU’s outlook.
- Past Track Record: Has SZU 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 SZU's historicals for more clarity.
- Other Interesting Stocks: It's worth checking to see how SZU 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 firstname.lastname@example.org. 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.