If you are looking to invest in Palmboomen Cultuur Maatschappij Mopoli (Palmeraies De Mopoli) NV.’s (ENXTBR:MOP), 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 MOP’s exposure to the wider market risk, which reflects changes in economic and political factors. Different characteristics of a stock expose it to various levels of market risk, and the market as a whole 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.
An interpretation of MOP’s beta
With a five-year beta of 0.18, Palmboomen Cultuur Maatschappij Mopoli (Palmeraies De Mopoli) appears to be a less volatile company compared to the rest of the market. This means that the change in MOP’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. MOP’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 MOP’s size and industry cause it to be more volatile?
A market capitalisation of €27.36M puts MOP in the category of small-cap stocks, which tends to possess higher beta than larger companies. But, MOP’s industry, food, is considered to be defensive, which means it is less volatile than the market over the economic cycle. As a result, we should expect a high beta for the small-cap MOP but a low beta for the food industry. It seems as though there is an inconsistency in risks from MOP’s size and industry.
How MOP’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 test MOP’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Considering fixed assets is virtually non-existent in MOP’s operations, it has low dependency on fixed costs to generate revenue. 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. Similarly, MOP’s beta value conveys the same message.
What this means for you:
MOP may be a worthwhile stock to hold onto in order to cushion the impact of a downturn. Depending on the composition of your portfolio, low-beta stocks such as MOP is valuable to lower your risk of market exposure, in particular, during times of economic decline. In order to fully understand whether MOP is a good investment for you, we also need to consider important company-specific fundamentals such as Palmboomen Cultuur Maatschappij Mopoli (Palmeraies De Mopoli)’s financial health and performance track record. I highly recommend you to complete your research by taking a look at the following:
- Financial Health: Is MOP’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 MOP 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 MOP’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.