Yahoo Finance One Thing To Remember About The Cardno Limited (ASX:CDD) Share Price
If you’re interested in Cardno Limited (ASX:CDD), 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. First, we have company specific volatility, which is the price gyrations of an individual stock. Holding at least 8 stocks can reduce this kind of risk across a portfolio. 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated 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. 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.
View our latest analysis for Cardno
What CDD’s beta value tells investors
Given that it has a beta of 0.84, we can surmise that the Cardno share price has not been strongly impacted by broader market volatility (over the last 5 years). If history is a good guide, owning the stock should help ensure that your portfolio is not overly sensitive to market volatility. Beta is worth considering, but it’s also important to consider whether Cardno is growing earnings and revenue. You can take a look for yourself, below.
How does CDD’s size impact its beta?
Cardno is a noticeably small company, with a market capitalisation of AU$462m. Most companies this size are not always actively traded. Very small companies often have a low beta value because their share prices are not well correlated with market volatility. This could be because the price is reacting to company specific events. Alternatively, the shares may not be actively traded.
What this means for you:
One potential advantage of owning low beta stocks like Cardno is that your overall portfolio won’t be too sensitive to overall market movements. However, this can be a blessing or a curse, depending on what’s happening in the broader market. In order to fully understand whether CDD is a good investment for you, we also need to consider important company-specific fundamentals such as Cardno’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 CDD’s future growth? Take a look at our free research report of analyst consensus for CDD’s outlook.
Past Track Record: Has CDD 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 CDD’s historicals for more clarity.
Other Interesting Stocks: It’s worth checking to see how CDD 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.
