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One Thing To Remember About The The Gorman-Rupp Company (NYSE:GRC) Share Price

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Simply Wall St
·3 min read
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Anyone researching The Gorman-Rupp Company (NYSE:GRC) 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 category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. 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.

See our latest analysis for Gorman-Rupp

What GRC's beta value tells investors

Given this level of beta, if the future looks like the past, we could therefore consider it likely that the stock price will experience share price volatility that is roughly similar to the overall market. Beta is worth considering, but it's also important to consider whether Gorman-Rupp is growing earnings and revenue. You can take a look for yourself, below.

NYSE:GRC Income Statement, March 2nd 2020
NYSE:GRC Income Statement, March 2nd 2020

How does GRC's size impact its beta?

With a market capitalisation of US$834m, Gorman-Rupp is a small cap stock. However, it is big enough to catch the attention of professional investors.

What this means for you:

It is probable that there is a link between the share price of Gorman-Rupp and the broader market, since it has a beta value quite close to one. However, long term investors are generally well served by looking past market volatility and focussing on the underlying development of the business. If that's your game, metrics such as revenue, earnings and cash flow will be more useful. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Gorman-Rupp’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Future Outlook: What are well-informed industry analysts predicting for GRC’s future growth? Take a look at our free research report of analyst consensus for GRC’s outlook.

  2. Past Track Record: Has GRC 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 GRC's historicals for more clarity.

  3. Other Interesting Stocks: It's worth checking to see how GRC measures up against other companies on valuation. You could start with this free list of prospective options.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.