The Mission Marketing Group plc (LON:TMMG): Risks You Need To Consider Before Buying
If you are looking to invest in The Mission Marketing Group plc’s (AIM:TMMG), 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 TMMG’s exposure to the wider market risk, which reflects changes in economic and political factors. Not every stock is exposed to the same level 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.
See our latest analysis for Mission Marketing Group
What is TMMG’s market risk?
With a five-year beta of 0.71, Mission Marketing Group appears to be a less volatile company compared to the rest of the market. This means the stock is more defensive against the ups and downs of a stock market, moving by less than the entire market index in times of change. TMMG’s beta indicates it is a stock that investors may find valuable if they want to reduce the overall market risk exposure of their stock portfolio.
Could TMMG’s size and industry cause it to be more volatile?
A market capitalisation of GBP £33.18M puts TMMG in the category of small-cap stocks, which tends to possess higher beta than larger companies. Conversely, the company operates in the media 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 TMMG, but a lower beta given the nature of the industry it operates in. It seems as though there is an inconsistency in risks from TMMG’s size and industry. A potential driver of this variance can be a fundamental factor, which we will take a look at next.
How TMMG’s assets could affect its 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 test TMMG’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Since TMMG’s fixed assets are only 3.03% of its total assets, it doesn’t depend heavily on a high level of these rigid and costly assets to operate its business. Thus, we can expect TMMG 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 could benefit from lower risk during times of economic decline by holding onto TMMG. Its low fixed cost also means that, in terms of operating leverage, it is relatively flexible during times of economic downturns. Consider the stock in terms of your other portfolio holdings, and whether it is worth investing more into TMMG. For more company-specific research on TMMG, check out our 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 TMMG 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.
