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Origin Agritech Limited (NASDAQ:SEED): How Does It Impact Your Portfolio?

If you are looking to invest in Origin Agritech Limited’s (NASDAQ:SEED), 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 SEED’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 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.

View our latest analysis for Origin Agritech

What is SEED’s market risk?

Origin Agritech’s beta of 0.41 indicates that the stock value will be less variable compared to the whole stock market. This means that the change in SEED’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. SEED’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.

Could SEED’s size and industry cause it to be more volatile?

SEED, with its market capitalisation of USD $18.53M, is a small-cap stock, which generally have higher beta than similar companies of larger size. However, SEED operates in the food industry, which has commonly demonstrated muted reactions to market-wide shocks. As a result, we should expect a high beta for the small-cap SEED but a low beta for the food industry. It seems as though there is an inconsistency in risks from SEED’s size and industry. A potential driver of this variance can be a fundamental factor, which we will take a look at next.

NasdaqGS:SEED Income Statement Dec 16th 17
NasdaqGS:SEED Income Statement Dec 16th 17

How SEED’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 examine SEED’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 a fixed to total assets ratio of over 30%, SEED seems to be a company which invests a big chunk of its capital on assets that cannot be scaled down on short-notice. As a result, this aspect of SEED indicates a higher beta than a similar size company with a lower portion of fixed assets on their balance sheet. This outcome contradicts SEED’s current beta value which indicates a below-average volatility.

What this means for you:

Are you a shareholder? You could benefit from lower risk during times of economic decline by holding onto SEED. Take into account your portfolio sensitivity to the market before you invest in the stock, as well as where we are in the current economic cycle. Depending on the composition of your portfolio, SEED may be a valuable stock to hold onto in order to cushion the impact of a downturn. For more company-specific research on SEED, check out our our free analysis plaform here.

Are you a potential investor? Depending on the composition of your portfolio, SEED may be a valuable addition to cushion the impact of a downturn. Potential investors should look into its fundamental factors such as its current valuation and financial health. Take into account your portfolio sensitivity to the market before you invest in SEED, as well as where we are in the current economic cycle. Continue your research on the stock with our free fundamental research report for SEED 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.