What You Must Know About Druckfarben Hellas AE.B.E.’s (ATH:DROUK) Market Risks

If you are a shareholder in Druckfarben Hellas AE.B.E.’s (ATSE:DROUK), or are thinking about investing in the company, knowing how it contributes to the risk and reward profile of your portfolio is important. Every stock in the market is exposed to market risk, which arises from macroeconomic factors such as economic growth and geo-political tussles just to name a few. This is measured by its beta. 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.

Check out our latest analysis for Druckfarben Hellas A.E.B.E

An interpretation of DROUK’s beta

Druckfarben Hellas A.E.B.E’s five-year beta of 1.69 means that the company’s value will swing up by more than the market during prosperous times, but also drop down by more in times of downturns. This level of volatility indicates bigger risk for investors who passively invest in the stock market index. Based on this beta value, DROUK will help diversify your portfolio, if it currently comprises of low-beta stocks. This will be beneficial for portfolio returns, in particular, when current market sentiment is positive.

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

With a market cap of €4.84M, DROUK falls within the small-cap spectrum of stocks, which are found to experience higher relative risk compared to larger companies. Moreover, DROUK’s industry, chemicals, is considered to be cyclical, which means it is more volatile than the market over the economic cycle. Therefore, investors may expect high beta associated with small companies, as well as those operating in the chemicals industry, relative to those more well-established firms in a more defensive industry. This is consistent with DROUK’s individual beta value we discussed above. Fundamental factors can also drive the cyclicality of the stock, which we will take a look at next.

ATSE:DROUK Income Statement May 15th 18
ATSE:DROUK Income Statement May 15th 18

Can DROUK’s asset-composition point to a higher 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 DROUK’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. With a fixed-assets-to-total-assets ratio of greater than 30%, DROUK appears to be a company that invests a large amount of capital in assets that are hard to scale down on short-notice. As a result, this aspect of DROUK indicates a higher beta than a similar size company with a lower portion of fixed assets on their balance sheet. Similarly, DROUK’s beta value conveys the same message.

What this means for you:

You could benefit from higher returns from DROUK during times of economic growth. Its higher fixed cost isn’t a major concern given margins are covered with high consumer demand. Though, in times of a downturn, it may be safe to look at a more defensive stock which can cushion the impact of lower demand. What I have not mentioned in my article here are important company-specific fundamentals such as Druckfarben Hellas A.E.B.E’s financial health and performance track record. I urge you to complete your research by taking a look at the following:

  1. Financial Health: Is DROUK’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.

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

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks 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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