What You Must Know About publity AG’s (ETR:PBY) Market Risks
If you are a shareholder in publity AG’s (XTRA:PBY), or are thinking about investing in the company, knowing how it contributes to the risk and reward profile of your portfolio is important. PBY is exposed to market-wide risk, which arises from investing in the stock market. This risk reflects changes in economic and political factors that affects all stocks, and is measured by its beta. Not all stocks are expose 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.
View our latest analysis for publity
What is PBY’s market risk?
With a five-year beta of 0.08, publity 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. PBY’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.
How does PBY’s size and industry impact its risk?
A market capitalisation of €72.60M puts PBY in the category of small-cap stocks, which tends to possess higher beta than larger companies. Moreover, PBY’s industry, real estate, is considered to be cyclical, which means it is more volatile than the market over the economic cycle. As a result, we should expect a high beta for the small-cap PBY but a low beta for the real estate industry. This is an interesting conclusion, since both PBY’s size and industry indicates the stock should have a higher beta than it currently has. There may be a more fundamental driver which can explain this inconsistency, which we will examine below.
Can PBY’s asset-composition point to a higher beta?
An asset-heavy company tends to have a higher beta because the risk associated with running fixed assets during a downturn is highly expensive. I examine PBY’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. Considering fixed assets is virtually non-existent in PBY’s operations, it has low dependency on fixed costs to generate revenue. Thus, we can expect PBY 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. Similarly, PBY’s beta value conveys the same message.
What this means for you:
You could benefit from lower risk during times of economic decline by holding onto PBY. Its low fixed cost also means that, in terms of operating leverage, it is relatively flexible during times of economic downturns. In order to fully understand whether PBY is a good investment for you, we also need to consider important company-specific fundamentals such as publity’s financial health and performance track record. I highly recommend you to complete your research by taking a look at the following:
Financial Health: Is PBY’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.
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.
