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One Thing To Remember About The Apollo Tourism & Leisure Ltd (ASX:ATL) Share Price

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If you own shares in Apollo Tourism & Leisure Ltd (ASX:ATL) then it's worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. 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 other type, which cannot be diversified away, is the volatility of the entire market. Every stock in the market is exposed to this volatility, which is linked to the fact that stocks prices are correlated in an efficient market.

Some stocks mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. 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.

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See our latest analysis for Apollo Tourism & Leisure

What we can learn from ATL's beta value

Given that it has a beta of 1.47, we can surmise that the Apollo Tourism & Leisure share price has been fairly sensitive to market volatility (over the last 5 years). If this beta value holds true in the future, Apollo Tourism & Leisure 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 Apollo Tourism & Leisure's revenue and earnings in the image below.

ASX:ATL Income Statement, June 6th 2019
ASX:ATL Income Statement, June 6th 2019

Could ATL's size cause it to be more volatile?

Apollo Tourism & Leisure is a noticeably small company, with a market capitalisation of AU$71m. Most companies this size are not always actively traded. Relatively few investors can influence the price of a smaller company, compared to a large company. This could explain the high beta value, in this case.

What this means for you:

Beta only tells us that the Apollo Tourism & Leisure share price is sensitive to broader market movements. This could indicate that it is a high growth company, or is heavily influenced by sentiment because it is speculative. Alternatively, it could have operating leverage in its business model. Ultimately, beta is an interesting metric, but there's plenty more to learn. In order to fully understand whether ATL is a good investment for you, we also need to consider important company-specific fundamentals such as Apollo Tourism & Leisure’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

  1. Future Outlook: What are well-informed industry analysts predicting for ATL’s future growth? Take a look at our free research report of analyst consensus for ATL’s outlook.

  2. Financial Health: Are ATL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.