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What Kind Of Share Price Volatility Should You Expect For Immobiliare Grande Distribuzione SIIQ S.p.A. (BIT:IGD)?

Simply Wall St

If you're interested in Immobiliare Grande Distribuzione SIIQ S.p.A. (BIT:IGD), 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 category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. 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. 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 below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.

See our latest analysis for Immobiliare Grande Distribuzione SIIQ

What IGD's beta value tells investors

Looking at the last five years, Immobiliare Grande Distribuzione SIIQ has a beta of 1.34. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. Based on this history, investors should be aware that Immobiliare Grande Distribuzione SIIQ are likely to rise strongly in times of greed, but sell off in times of fear. Beta is worth considering, but it's also important to consider whether Immobiliare Grande Distribuzione SIIQ is growing earnings and revenue. You can take a look for yourself, below.

BIT:IGD Income Statement, September 7th 2019

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

With a market capitalisation of €608m, Immobiliare Grande Distribuzione SIIQ is a small cap stock. However, it is big enough to catch the attention of professional investors. It is quite common to see a small-cap stock with a beta greater than one. In part, that's because relatively few investors can influence the price of a smaller company, compared to a large company.

What this means for you:

Since Immobiliare Grande Distribuzione SIIQ 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 IGD is a good investment for you, we also need to consider important company-specific fundamentals such as Immobiliare Grande Distribuzione SIIQ’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 IGD’s future growth? Take a look at our free research report of analyst consensus for IGD’s outlook.
  2. Past Track Record: Has IGD 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 IGD's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how IGD 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.