Does Bonso Electronics International Inc (NASDAQ:BNSO) Have A High Beta?
Anyone researching Bonso Electronics International Inc (NASDAQ:BNSO) 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. 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 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. Beta can be a useful tool to understand how much a stock is influenced by market risk (volatility). However, Warren Buffett said ‘volatility is far from synonymous with risk’ in his 2014 letter to investors. So, while useful, beta is not the only metric to consider. To use beta as an investor, you must first understand that the overall market has a beta of 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 Bonso Electronics International
What does BNSO’s beta value mean to investors?
Given that it has a beta of 1.37, we can surmise that the Bonso Electronics International share price has been fairly sensitive to market volatility (over the last 5 years). If this beta value holds true in the future, Bonso Electronics International shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Beta is worth considering, but it’s also important to consider whether Bonso Electronics International is growing earnings and revenue. You can take a look for yourself, below.
Could BNSO’s size cause it to be more volatile?
Bonso Electronics International is a noticeably small company, with a market capitalisation of US$11m. Most companies this size are not always actively traded. It takes less money to influence the share price of a very small company. This may explain the excess volatility implied by this beta value.
What this means for you:
Since Bonso Electronics International tends to moves up when the market is going up, and down when it’s going down, potential investors may wish to reflect on the overall market, when considering the stock. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as Bonso Electronics International’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
Future Outlook: What are well-informed industry analysts predicting for BNSO’s future growth? Take a look at our free research report of analyst consensus for BNSO’s outlook.
Past Track Record: Has BNSO 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 BNSO’s historicals for more clarity.
Other Interesting Stocks: It’s worth checking to see how BNSO measures up against other companies on valuation. You could start with this free list of prospective options.
To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
