Polygiene AB (publ.) (STO:POLYG): What Does Its Beta Value Mean For Your Portfolio?

Simply Wall St

Anyone researching Polygiene AB (publ.) (STO:POLYG) might want to consider the historical volatility of the share price. 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 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 are more sensitive to general market forces than others. 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.

View our latest analysis for Polygiene AB (publ.)

What POLYG's beta value tells investors

Given that it has a beta of 1.26, we can surmise that the Polygiene AB (publ.) share price has been fairly sensitive to market volatility (over the last 5 years). If the past is any guide, we would expect that Polygiene AB (publ.) shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. Beta is worth considering, but it's also important to consider whether Polygiene AB (publ.) is growing earnings and revenue. You can take a look for yourself, below.

OM:POLYG Income Statement, October 9th 2019

How does POLYG's size impact its beta?

Polygiene AB (publ.) is a rather small company. It has a market capitalisation of kr90m, which means it is probably under the radar of most investors. 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 Polygiene AB (publ.) 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 Polygiene AB (publ.)’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 POLYG’s future growth? Take a look at our free research report of analyst consensus for POLYG’s outlook.
  2. Past Track Record: Has POLYG 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 POLYG's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how POLYG 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.