Is Koppers Holdings Inc. (NYSE:KOP) A Volatile Stock?
If you're interested in Koppers Holdings Inc. (NYSE:KOP), 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. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. 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 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 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 Koppers Holdings
What does KOP's beta value mean to investors?
With a beta of 1.09, (which is quite close to 1) the share price of Koppers Holdings has historically been about as voltile as the broader 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. Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see Koppers Holdings's revenue and earnings in the image below.
Could KOP's size cause it to be more volatile?
Koppers Holdings is a small cap stock with a market capitalisation of US$592m. Most companies this size are actively traded. 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:
Koppers Holdings has a beta value quite close to that of the overall market. That doesn't tell us much on its own, so it is probably worth considering whether the company is growing, if you're looking for stocks that will go up more than the overall market. In order to fully understand whether KOP is a good investment for you, we also need to consider important company-specific fundamentals such as Koppers Holdings’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
Future Outlook: What are well-informed industry analysts predicting for KOP’s future growth? Take a look at our free research report of analyst consensus for KOP’s outlook.
Past Track Record: Has KOP 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 KOP's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how KOP 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.
