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Is TriCo Bancshares (NASDAQ:TCBK) A Volatile Stock?

Simply Wall St

If you own shares in TriCo Bancshares (NASDAQ:TCBK) then it's worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. First, we have company specific volatility, which is the price gyrations of an individual stock. Holding at least 8 stocks can reduce this kind of risk across a portfolio. 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 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. Any stock with a beta of greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or poorly correlated with the market.

See our latest analysis for TriCo Bancshares

What we can learn from TCBK's beta value

Zooming in on TriCo Bancshares, we see it has a five year beta of 0.89. This is below 1, so historically its share price has been rather independent from the market. This means that -- if history is a guide -- buying the stock would reduce the impact of overall market volatility in many portfolios (depending on the beta of the portfolio, of course). Beta is worth considering, but it's also important to consider whether TriCo Bancshares is growing earnings and revenue. You can take a look for yourself, below.

NasdaqGS:TCBK Income Statement, October 2nd 2019

How does TCBK's size impact its beta?

TriCo Bancshares is a small company, but not tiny and little known. It has a market capitalisation of US$1.1b, which means it would be on the radar of intstitutional investors. Small cap stocks ofthen have a higher beta than the overall market. However, small companies can also be strongly impacted by company specific developments, which can move the share price in ways that are unrelated to the broader market. That could explain why this one has a low beta value.

What this means for you:

Since TriCo Bancshares is not heavily influenced by market moves, its share price is probably far more dependend on company specific developments. It could pay to take a closer look at metrics such as revenue growth, earnings growth, and debt. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as TriCo Bancshares’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 TCBK’s future growth? Take a look at our free research report of analyst consensus for TCBK’s outlook.
  2. Past Track Record: Has TCBK 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 TCBK's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how TCBK 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.