One Thing To Consider Before Buying BO.S Better Online Solutions Ltd. (NASDAQ:BOSC)
If you are looking to invest in BO.S Better Online Solutions Ltd.’s (NASDAQ:BOSC), or currently own the stock, then you need to understand its beta in order to understand how it can affect the risk of your portfolio. The beta measures BOSC’s exposure to the wider market risk, which reflects changes in economic and political factors. Not all stocks are expose to the same level of market risk, and the market as a whole represents a beta 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 B.O.S Better Online Solutions
What does BOSC’s beta value mean?
With a five-year beta of 0.62, B.O.S Better Online Solutions appears to be a less volatile company compared to the rest of the market. This means that the change in BOSC’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. Based on this beta value, BOSC appears to be a stock that an investor with a high-beta portfolio would look for to reduce risk exposure to the market.
How does BOSC’s size and industry impact its risk?
A market capitalisation of US$7.62M puts BOSC in the category of small-cap stocks, which tends to possess higher beta than larger companies. Moreover, BOSC’s industry, communications, 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 BOSC but a low beta for the communications industry. It seems as though there is an inconsistency in risks portrayed by BOSC’s size and industry relative to its actual beta value. There may be a more fundamental driver which can explain this inconsistency, which we will examine below.
How BOSC’s assets could affect its 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 BOSC’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. Given that fixed assets make up less than a third of the company’s total assets, BOSC doesn’t rely heavily upon these expensive, inflexible assets to run its business during downturns. 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 may reap the benefit of muted movements during times of economic decline by holding onto BOSC. Its low fixed cost also means that, in terms of operating leverage, its costs are relatively malleable to preserve margins. In order to fully understand whether BOSC is a good investment for you, we also need to consider important company-specific fundamentals such as B.O.S Better Online Solutions’s financial health and performance track record. I urge you to complete your research by taking a look at the following:
Financial Health: Is BOSC’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 BOSC 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 BOSC’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.
