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

    1.0786
    -0.0007 (-0.06%)
     
  • 10-Yr Bond

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

    1.2614
    -0.0008 (-0.06%)
     
  • USD/JPY

    151.3070
    -0.0650 (-0.04%)
     
  • Bitcoin USD

    69,957.16
    -657.98 (-0.93%)
     
  • 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 Glaukos Corporation (GKOS) Right Now?

If you are looking to invest in Glaukos Corporation’s (NYSE:GKOS), or currently own the stock, then you need to understand its beta in order to understand how it can affect the risk of your portfolio. GKOS is exposed to market-wide risk, which arises from investing in the stock market. This risk reflects changes in economic and political factors that affects all stocks, and is measured by its beta. Different characteristics of a stock expose it to various levels of market risk, and the broad market index represents a beta value 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.

Check out our latest analysis for Glaukos

What is GKOS’s market risk?

Glaukos has a beta of 1.31, which means that the percentage change in its stock value will be higher than the entire market in times of booms and busts. A high level of beta means investors face higher risk associated with potential gains and losses driven by market movements. According to this value of beta, GKOS will help diversify your portfolio, if it currently comprises of low-beta stocks. This will be beneficial for portfolio returns, in particular, when current market sentiment is positive.

Could GKOS's size and industry cause it to be more volatile?

A market capitalisation of USD $1.15B puts GKOS in the category of small-cap stocks, which tends to possess higher beta than larger companies. However, GKOS operates in the healthcare equipment and supplies industry, which has commonly demonstrated muted reactions to market-wide shocks. Therefore, investors can expect a high beta associated with the size of GKOS, but a lower beta given the nature of the industry it operates in. This is an interesting conclusion, since its industry suggests GKOS should be less volatile than it actually is. There may be a more fundamental driver which can explain this inconsistency, which we will examine below.

NYSE:GKOS Income Statement Oct 4th 17
NYSE:GKOS Income Statement Oct 4th 17

How GKOS's assets could affect its 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 examine GKOS’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. Given that fixed assets make up less than a third of the company’s total assets, GKOS doesn’t rely heavily upon these expensive, inflexible assets to run its business during downturns. As a result, the company may be less volatile relative to broad market movements, compared to a company of similar size but higher proportion of fixed assets. However, this is the opposite to what GKOS’s actual beta value suggests, which is higher stock volatility relative to the market.

What this means for you:

Are you a shareholder? You may reap the gains of GKOS's returns during times of economic growth by holding the stock. Its low fixed cost also implies that it has the flexibility to adjust its cost to preserve margins during times of a downturn. I recommend analysing the stock in terms of your current portfolio composition before deciding to invest more into GKOS.

Are you a potential investor? Before you buy GKOS, you should take into account how their portfolio currently moves with the market, in addition to the current economic environment. GKOS may be a valuable addition to portfolios during times of economic growth, and it may be work looking further into fundamental factors such as current valuation and financial health.

Beta is one aspect of your portfolio construction to consider when holding or entering into a stock. But it is certainly not the only factor. Take a look at our most recent infographic report on Glaukos for a more in-depth analysis of the stock to help you make a well-informed investment decision. But if you are not interested in Glaukos anymore, you can use our free platform to see my list of over 50 other stocks with a high growth potential.


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