What You Must Know About MDxHealth SA’s (EBR:MDXH) Market Risks
For MDxHealth SA’s (ENXTBR:MDXH) shareholders, and also potential investors in the stock, understanding how the stock’s risk and return characteristics can impact your portfolio is important. The beta measures MDXH’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 expected to exhibit higher volatility resulting from market-wide shocks compared to one with a beta below one.
Check out our latest analysis for MDxHealth
What is MDXH’s market risk?
With a five-year beta of 0.9, MDxHealth appears to be a less volatile company compared to the rest of the market. This means that the change in MDXH’s value, whether it goes up or down, will be of a smaller degree than the change in value of the entire stock market index. MDXH’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 MDXH’s size and industry impact its risk?
MDXH, with its market capitalisation of €253.14M, is a small-cap stock, which generally have higher beta than similar companies of larger size. Conversely, the company operates in the biotechs 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 MDXH, but a lower beta given the nature of the industry it operates in. It seems as though there is an inconsistency in risks from MDXH’s size and industry. A potential driver of this variance can be a fundamental factor, which we will take a look at next.
How MDXH’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 MDXH’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Since MDXH’s fixed assets are only 6.34% 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 MDXH 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:
You may reap the benefit of muted movements during times of economic decline by holding onto MDXH. Its low fixed cost also means that, in terms of operating leverage, its costs are relatively malleable to preserve margins. What I have not mentioned in my article here are important company-specific fundamentals such as MDxHealth’s financial health and performance track record. I highly recommend you to complete your research by taking a look at the following:
Future Outlook: What are well-informed industry analysts predicting for MDXH’s future growth? Take a look at our free research report of analyst consensus for MDXH’s outlook.
Past Track Record: Has MDXH 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 MDXH’s historicals for more clarity.
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.
