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Should You Have John B Sanfilippo & Son Inc’s (NASDAQ:JBSS) In Your Portfolio?

If you own shares in John B Sanfilippo & Son Inc (NASDAQ:JBSS) then it’s worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. 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 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 are more sensitive to general market forces than others. 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. A stock with a beta greater than one is more sensitive to broader market movements than a stock with a beta of less than one.

Check out our latest analysis for John B. Sanfilippo & Son

What JBSS’s beta value tells investors

John B. Sanfilippo & Son has a five-year beta of 0.95. This is reasonably close to the market beta of 1, so the stock has in the past displayed similar levels of volatility to the overall 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. 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 John B. Sanfilippo & Son fares in that regard, below.

NasdaqGS:JBSS Income Statement Export October 2nd 18
NasdaqGS:JBSS Income Statement Export October 2nd 18

Does JBSS’s size influence the expected beta?

John B. Sanfilippo & Son is a small company, but not tiny and little known. It has a market capitalisation of US$809.8m, which means it would be on the radar of intstitutional investors. It takes less capital to move the share price of small companies, and they are also more impacted by company specific events, so it’s a bit of a surprise that the beta is so close to the overall market.

What this means for you:

It is probable that there is a link between the share price of John B. Sanfilippo & Son and the broader market, since it has a beta value quite close to one. However, long term investors are generally well served by looking past market volatility and focussing on the underlying development of the business. If that’s your game, metrics such as revenue, earnings and cash flow will be more useful. In order to fully understand whether JBSS is a good investment for you, we also need to consider important company-specific fundamentals such as John B. Sanfilippo & Son’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 JBSS’s future growth? Take a look at our free research report of analyst consensus for JBSS’s outlook.

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

  3. Other Interesting Stocks: It’s worth checking to see how JBSS measures up against other companies on valuation. You could start with this free list of prospective options.

To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

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