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How Ormat Technologies, Inc. (NYSE:ORA) Can Impact Your Portfolio Volatility

Simply Wall St

Anyone researching Ormat Technologies, Inc. (NYSE:ORA) 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 type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.

Some stocks mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. 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.

Check out our latest analysis for Ormat Technologies

What we can learn from ORA's beta value

With a beta of 1.05, (which is quite close to 1) the share price of Ormat Technologies has historically been about as voltile as the broader market. While history does not always repeat, this may indicate that the stock price will continue to be exposed to market risk, albeit not overly so. Share price volatility is well worth considering, but most long term investors consider the history of revenue and earnings growth to be more important. Take a look at how Ormat Technologies fares in that regard, below.

NYSE:ORA Income Statement, September 16th 2019

Could ORA's size cause it to be more volatile?

Ormat Technologies is a fairly large company. It has a market capitalisation of US$3.7b, which means it is probably on the radar of most investors. It's not overly surprising to see large companies with beta values reasonably close to the market average. After all, large companies make up a higher weighting of the index than do small companies.

What this means for you:

Ormat Technologies has a beta value quite close to that of the overall market. That doesn't tell us much on its own, so it is probably worth considering whether the company is growing, if you're looking for stocks that will go up more than the overall market. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Ormat Technologies’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 ORA’s future growth? Take a look at our free research report of analyst consensus for ORA’s outlook.
  2. Past Track Record: Has ORA 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 ORA's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how ORA measures up against other companies on valuation. You could start with this free list of prospective options.

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.

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. Thank you for reading.