Yahoo Finance Does Brightcove Inc. (NASDAQ:BCOV) Have A High Beta?
Anyone researching Brightcove Inc. (NASDAQ:BCOV) might want to consider the historical volatility of the share price. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. 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. 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.
Check out our latest analysis for Brightcove
What we can learn from BCOV's beta value
Zooming in on Brightcove, we see it has a five year beta of 0.85. This is below 1, so historically its share price has been rather independent from the market. This suggests that including it in your portfolio will reduce volatility arising from broader market movements, assuming your portfolio's weighted average beta is higher than 0.85. Beta is worth considering, but it's also important to consider whether Brightcove is growing earnings and revenue. You can take a look for yourself, below.
Could BCOV's size cause it to be more volatile?
Brightcove is a rather small company. It has a market capitalisation of US$481m, which means it is probably under the radar of most investors. It is not unusual for very small companies to have a low beta value, especially if only low volumes of shares are traded. Even when they are traded more actively, the share price is often more susceptible to company specific developments than overall market volatility.
What this means for you:
One potential advantage of owning low beta stocks like Brightcove 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 BCOV is a good investment for you, we also need to consider important company-specific fundamentals such as Brightcove’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 BCOV’s future growth? Take a look at our free research report of analyst consensus for BCOV’s outlook.
Past Track Record: Has BCOV 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 BCOV's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how BCOV 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.
