What You Must Know About Kalpataru Power Transmission Limited’s (NSE:KALPATPOWR) Beta Value
If you own shares in Kalpataru Power Transmission Limited (NSE:KALPATPOWR) 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. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the 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. 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.
View our latest analysis for Kalpataru Power Transmission
What we can learn from KALPATPOWR’s beta value
Kalpataru Power Transmission has a five-year beta of 0.94. This is reasonably close to the market beta of 1, so the stock has in the past displayed similar levels of volatility to the overall market. If the future looks like the past, we could therefore consider it likely that the stock price will experience share price volatility that is roughly similar to the overall market. Beta is worth considering, but it’s also important to consider whether Kalpataru Power Transmission is growing earnings and revenue. You can take a look for yourself, below.
Does KALPATPOWR’s size influence the expected beta?
Kalpataru Power Transmission is a small company, but not tiny and little known. It has a market capitalisation of ₹52b, which means it would be on the radar of intstitutional investors. Small companies often have a high beta value because the stock price can move on relatively low capital flows. So it’s interesting to note that this stock historically has a beta value quite close to one.
What this means for you:
Since Kalpataru Power Transmission has a beta close to one, it will probably show a positive return when the market is moving up, based on history. If you’re trying to generate better returns than the market, it would be worth thinking about other metrics such as cashflows, dividends and revenue growth might be a more useful guide to the future. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as Kalpataru Power Transmission’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 KALPATPOWR’s future growth? Take a look at our free research report of analyst consensus for KALPATPOWR’s outlook.
Past Track Record: Has KALPATPOWR 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 KALPATPOWR’s historicals for more clarity.
Other Interesting Stocks: It’s worth checking to see how KALPATPOWR 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.
