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All You Need To Know About Revlon Inc’s (NYSE:REV) Risks

If you are looking to invest in Revlon Inc’s (NYSE:REV), 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. The beta measures REV’s exposure to the wider market risk, which reflects changes in economic and political factors. Not all stocks are expose to the same level of market risk, and the market as a whole 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.

See our latest analysis for Revlon

An interpretation of REV’s beta

Revlon’s beta of 0.64 indicates that the company is less volatile relative to the diversified market portfolio. The stock will exhibit muted movements in both the downside and upside, in response to changing economic conditions, whereas the general market may move by a lot more. REV’s beta implies it may be a stock that investors with high-beta portfolios might find relevant if they wanted to reduce their exposure to market risk, especially during times of downturns.

How does REV’s size and industry impact its risk?

With a market cap of USD $1.17B, REV falls within the small-cap spectrum of stocks, which are found to experience higher relative risk compared to larger companies. Conversely, the company operates in the personal products industry, which has been found to have low sensitivity to market-wide shocks. Therefore, investors can expect a high beta associated with the size of REV, but a lower beta given the nature of the industry it operates in. This is an interesting conclusion, since its size suggests REV should be more volatile than it actually is. There may be a more fundamental driver which can explain this inconsistency, which we will examine below.

NYSE:REV Income Statement Dec 30th 17
NYSE:REV Income Statement Dec 30th 17

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

During times of economic downturn, low demand may cause companies to readjust production of their goods and services. It is more difficult for companies to lower their cost, if the majority of these costs are generated by fixed assets. Therefore, this is a type of risk which is associated with higher beta. I examine REV’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. Considering fixed assets account for less than a third of the company’s overall assets, REV seems to have a smaller dependency on fixed costs to generate revenue. Thus, we can expect REV 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:

Are you a shareholder? You may reap the benefit of muted movements during times of economic decline by holding onto REV. Its low fixed cost also means that, in terms of operating leverage, its costs are relatively malleable to preserve margins. I recommend analysing the stock in terms of your current portfolio composition before increasing your exposure to the stock. For next steps, take a look at REV’s outlook to see what analysts are expecting for the stock on our free analysis plaform here.

Are you a potential investor? You should consider the stock in terms of your portfolio. It could be a valuable addition in times of an economic decline, due to its low fixed cost and low beta. However, I recommend you to also look at its fundamental factors as well, such as its current valuation and financial health to assess its investment thesis in further detail. Continue your research on the stock with our free fundamental research report for REV 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.

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