Yahoo Finance Does The Donnelley Financial Solutions, Inc. (NYSE:DFIN) Share Price Fall With The Market?
If you're interested in Donnelley Financial Solutions, Inc. (NYSE:DFIN), 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. 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 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 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.
View our latest analysis for Donnelley Financial Solutions
What DFIN's beta value tells investors
Zooming in on Donnelley Financial Solutions, we see it has a five year beta of 1.84. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. Based on this history, investors should be aware that Donnelley Financial Solutions are likely to rise strongly in times of greed, but sell off in times of fear. 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 Donnelley Financial Solutions's revenue and earnings in the image below.
Could DFIN's size cause it to be more volatile?
Donnelley Financial Solutions is a noticeably small company, with a market capitalisation of US$336m. Most companies this size are not always actively traded. 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:
Beta only tells us that the Donnelley Financial Solutions 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 DFIN is a good investment for you, we also need to consider important company-specific fundamentals such as Donnelley Financial Solutions’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 DFIN’s future growth? Take a look at our free research report of analyst consensus for DFIN’s outlook.
Past Track Record: Has DFIN 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 DFIN's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how DFIN measures up against other companies on valuation. You could start with this free list of prospective options.
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.
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. Thank you for reading.
