Anyone researching MasTec, Inc. (NYSE:MTZ) might want to consider the historical volatility of the share price. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the portfolio. The second sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all stocks on the market.
Some stocks are more sensitive to general market forces than others. Some investors use beta as a measure of how much a certain stock is impacted by market risk (volatility). While we should keep in mind that Warren Buffett has cautioned that 'Volatility is far from synonymous with risk', beta is still a useful factor to consider. To make good use of it you must first know that the beta of the overall market is one. A stock with a beta greater than one is more sensitive to broader market movements than a stock with a beta of less than one.
What does MTZ's beta value mean to investors?
Given that it has a beta of 1.34, we can surmise that the MasTec share price has been fairly sensitive to market volatility (over the last 5 years). If this beta value holds true in the future, MasTec shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Beta is worth considering, but it's also important to consider whether MasTec is growing earnings and revenue. You can take a look for yourself, below.
How does MTZ's size impact its beta?
MasTec is a fairly large company. It has a market capitalisation of US$4.8b, which means it is probably on the radar of most investors. It has a relatively high beta, suggesting it may be somehow leveraged to macroeconomic conditions. For example, it might be a high growth stock with lots of investors trading the shares. It's notable when large companies to have high beta values, because it usually takes substantial capital flows to move their share prices.
What this means for you:
Since MasTec tends to moves up when the market is going up, and down when it's going down, potential investors may wish to reflect on the overall market, when considering the stock. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as MasTec’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 MTZ’s future growth? Take a look at our free research report of analyst consensus for MTZ’s outlook.
- Past Track Record: Has MTZ 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 MTZ's historicals for more clarity.
- Other Interesting Stocks: It's worth checking to see how MTZ measures up against other companies on valuation. You could start with this free list of prospective options.
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