If you're interested in Cellectis S.A. (EPA:ALCLS), then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. The first category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. 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 are more sensitive to general market forces than others. 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. A stock with a beta below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.
What we can learn from ALCLS's beta value
Looking at the last five years, Cellectis has a beta of 1.33. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. If this beta value holds true in the future, Cellectis shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see Cellectis's revenue and earnings in the image below.
Does ALCLS's size influence the expected beta?
With a market capitalisation of €484m, Cellectis is a small cap stock. However, it is big enough to catch the attention of professional investors. It is quite common to see a small-cap stock with a beta greater than one. In part, that's because relatively few investors can influence the price of a smaller company, compared to a large company.
What this means for you:
Since Cellectis 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 Cellectis’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 ALCLS’s future growth? Take a look at our free research report of analyst consensus for ALCLS’s outlook.
- Past Track Record: Has ALCLS 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 ALCLS's historicals for more clarity.
- Other Interesting Stocks: It's worth checking to see how ALCLS measures up against other companies on valuation. You could start with this free list of prospective options.
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If you spot an error that warrants correction, please contact the editor at email@example.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.