Yahoo Finance Before You Buy Conduent Incorporated (NYSE:CNDT), Consider Its Volatility
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If you own shares in Conduent Incorporated (NYSE:CNDT) 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. 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 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 are more sensitive to general market forces than others. 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 greater than one is more sensitive to broader market movements than a stock with a beta of less than one.
See our latest analysis for Conduent
What CNDT's beta value tells investors
Given that it has a beta of 1.69, we can surmise that the Conduent share price has been fairly sensitive to market volatility (over the last 5 years). If this beta value holds true in the future, Conduent 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 Conduent's revenue and earnings in the image below.
How does CNDT's size impact its beta?
Conduent is a reasonably big company, with a market capitalisation of US$2.0b. Most companies this size are actively traded with decent volumes of shares changing hands each day. 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:
Beta only tells us that the Conduent 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 CNDT is a good investment for you, we also need to consider important company-specific fundamentals such as Conduent’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 CNDT’s future growth? Take a look at our free research report of analyst consensus for CNDT’s outlook.
Past Track Record: Has CNDT 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 CNDT's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how CNDT measures up against other companies on valuation. You could start with this free list of prospective options.
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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.