Advertisement
U.S. markets closed
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • Dow 30

    39,807.37
    +47.29 (+0.12%)
     
  • Nasdaq

    16,379.46
    -20.06 (-0.12%)
     
  • Russell 2000

    2,124.55
    +10.20 (+0.48%)
     
  • Crude Oil

    83.11
    -0.06 (-0.07%)
     
  • Gold

    2,254.80
    +16.40 (+0.73%)
     
  • Silver

    25.10
    +0.18 (+0.74%)
     
  • EUR/USD

    1.0778
    -0.0015 (-0.14%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • GBP/USD

    1.2622
    +0.0000 (+0.00%)
     
  • USD/JPY

    151.4080
    +0.0360 (+0.02%)
     
  • Bitcoin USD

    70,312.30
    +320.62 (+0.46%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Nikkei 225

    40,369.44
    +201.37 (+0.50%)
     

Should You Be Holding Countrywide plc (LON:CWD) Right Now?

For Countrywide plc’s (LSE:CWD) shareholders, and also potential investors in the stock, understanding how the stock’s risk and return characteristics can impact your portfolio is important. Every stock in the market is exposed to market risk, which arises from macroeconomic factors such as economic growth and geo-political tussles just to name a few. This is measured by its beta. Not every stock is exposed to the same level of market risk, and the market as a whole represents a beta of one. A stock with a beta greater than one is considered more sensitive to market-wide shocks compared to a stock that trades below the value of one.

View our latest analysis for Countrywide

What is CWD’s market risk?

Countrywide’s beta of 0.68 indicates that the stock value will be less variable compared to the whole stock market. This means the stock is more defensive against the ups and downs of a stock market, moving by less than the entire market index in times of change. Based on this beta value, CWD appears to be a stock that an investor with a high-beta portfolio would look for to reduce risk exposure to the market.

Does CWD’s size and industry impact the expected beta?

With a market cap of UK£213.08M, CWD falls within the small-cap spectrum of stocks, which are found to experience higher relative risk compared to larger companies. In addition to size, CWD also operates in the real estate industry, which has commonly demonstrated strong reactions to market-wide shocks. Therefore, investors may expect high beta associated with small companies, as well as those operating in the real estate industry, relative to those more well-established firms in a more defensive industry. It seems as though there is an inconsistency in risks portrayed by CWD’s size and industry relative to its actual beta value. There may be a more fundamental driver which can explain this inconsistency, which we will examine below.

LSE:CWD Income Statement Mar 2nd 18
LSE:CWD Income Statement Mar 2nd 18

Is CWD’s cost structure indicative of a high beta?

An asset-heavy company tends to have a higher beta because the risk associated with running fixed assets during a downturn is highly expensive. I test CWD’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Given that fixed assets make up less than a third of the company’s total assets, CWD doesn’t rely heavily upon these expensive, inflexible assets to run its business during downturns. Thus, we can expect CWD to be more stable in the face of market movements, relative to its peers of similar size but with a higher portion of fixed assets on their books. This is consistent with is current beta value which also indicates low volatility.

What this means for you:

You may reap the benefit of muted movements during times of economic decline by holding onto CWD. Its low fixed cost also means that, in terms of operating leverage, its costs are relatively malleable to preserve margins. What I have not mentioned in my article here are important company-specific fundamentals such as Countrywide’s financial health and performance track record. I urge you to complete your research by taking a look at the following:

  1. Future Outlook: What are well-informed industry analysts predicting for CWD’s future growth? Take a look at our free research report of analyst consensus for CWD’s outlook.

  2. Past Track Record: Has CWD 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 CWD’s historicals for more clarity.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

Advertisement