What Kind Of Share Price Volatility Should You Expect For BancorpSouth Bank (NYSE:BXS)?
If you're interested in BancorpSouth Bank (NYSE:BXS), 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. 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 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. Beta is a widely used metric to measure a stock's exposure to market risk (volatility). Before we go on, it's worth noting that Warren Buffett pointed out in his 2014 letter to shareholders that 'volatility is far from synonymous with risk.' Having said that, beta can still be rather useful. The first thing to understand about beta is that the beta of the overall market is 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.
Check out our latest analysis for BancorpSouth Bank
What we can learn from BXS's beta value
Zooming in on BancorpSouth Bank, we see it has a five year beta of 1.45. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. If this beta value holds true in the future, BancorpSouth Bank 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 BancorpSouth Bank is growing earnings and revenue. You can take a look for yourself, below.
How does BXS's size impact its beta?
BancorpSouth Bank is a fairly large company. It has a market capitalisation of US$2.1b, which means it is probably on the radar of most investors. It takes deep pocketed investors to influence the share price of a large company, so it's a little unusual to see companies this size with high beta values. It may be that that this company is more heavily impacted by broader economic factors than most.
What this means for you:
Since BancorpSouth Bank tends to move 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 BancorpSouth Bank’s financial health and performance track record. I urge you to continue your research by taking a look at the following:
Future Outlook: What are well-informed industry analysts predicting for BXS’s future growth? Take a look at our free research report of analyst consensus for BXS’s outlook.
Past Track Record: Has BXS 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 BXS's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how BXS measures up against other companies on valuation. You could start with this free list of prospective options.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.
