Should You Have Nymox Pharmaceutical Corporation’s (NASDAQ:NYMX) In Your Portfolio?
For Nymox Pharmaceutical Corporation’s (NASDAQ:NYMX) shareholders, and also potential investors in the stock, understanding how the stock’s risk and return characteristics can impact your portfolio is important. NYMX 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 Nymox Pharmaceutical
An interpretation of NYMX’s beta
Nymox Pharmaceutical’s beta of 0.88 indicates that the stock value will be less variable compared to the whole stock market. The stock will exhibit muted movements in both the downside and upside, in response to changing economic conditions, whereas the general market may move by a lot more. NYMX’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.
Does NYMX’s size and industry impact the expected beta?
A market capitalisation of US$205.62M puts NYMX in the category of small-cap stocks, which tends to possess higher beta than larger companies. However, NYMX operates in the biotechs industry, which has commonly demonstrated muted reactions to market-wide shocks. Therefore, investors can expect a high beta associated with the size of NYMX, but a lower beta given the nature of the industry it operates in. This is an interesting conclusion, since its size suggests NYMX should be more volatile than it actually is. There may be a more fundamental driver which can explain this inconsistency, which we will examine below.
How NYMX’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 NYMX’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Since NYMX’s fixed assets are only 1.21% of its total assets, it doesn’t depend heavily on a high level of these rigid and costly assets to operate its business. As a result, the company may be less volatile relative to broad market movements, compared to a company of similar size but higher proportion of fixed assets. This is consistent with is current beta value which also indicates low volatility.
What this means for you:
You could benefit from lower risk during times of economic decline by holding onto NYMX. Its low fixed cost also means that, in terms of operating leverage, it is relatively flexible during times of economic downturns. What I have not mentioned in my article here are important company-specific fundamentals such as Nymox Pharmaceutical’s financial health and performance track record. I urge you to complete your research by taking a look at the following:
Financial Health: Is NYMX’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.
Past Track Record: Has NYMX 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 NYMX’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.
