Advertisement
UK markets close in 7 hours 29 minutes
  • FTSE 100

    7,954.67
    +22.69 (+0.29%)
     
  • FTSE 250

    19,783.91
    -26.75 (-0.14%)
     
  • AIM

    741.86
    -0.25 (-0.03%)
     
  • GBP/EUR

    1.1683
    +0.0014 (+0.12%)
     
  • GBP/USD

    1.2608
    -0.0030 (-0.24%)
     
  • Bitcoin GBP

    55,975.80
    +805.88 (+1.46%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,248.49
    +44.91 (+0.86%)
     
  • DOW

    39,760.08
    +477.75 (+1.22%)
     
  • CRUDE OIL

    81.74
    +0.39 (+0.48%)
     
  • GOLD FUTURES

    2,215.90
    +3.20 (+0.14%)
     
  • NIKKEI 225

    40,168.07
    -594.66 (-1.46%)
     
  • HANG SENG

    16,541.42
    +148.58 (+0.91%)
     
  • DAX

    18,502.27
    +25.18 (+0.14%)
     
  • CAC 40

    8,234.39
    +29.58 (+0.36%)
     

Does Genel Energy plc (LON:GENL) Have A Volatile Share Price?

Anyone researching Genel Energy plc (LON:GENL) might want to consider the historical volatility of the share price. 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 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.

See our latest analysis for Genel Energy

What GENL’s beta value tells investors

Given that it has a beta of 1.52, we can surmise that the Genel Energy share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that Genel Energy 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 Genel Energy’s revenue and earnings in the image below.

LSE:GENL Income Statement, March 7th 2019
LSE:GENL Income Statement, March 7th 2019

How does GENL’s size impact its beta?

With a market capitalisation of UK£610m, Genel Energy is a small cap stock. However, it is big enough to catch the attention of professional investors. It is quite common to see a small-cap stock with a beta greater than one. In part, that’s because relatively few investors can influence the price of a smaller company, compared to a large company.

What this means for you:

Beta only tells us that the Genel Energy 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. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as Genel Energy’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

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

  2. Past Track Record: Has GENL 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 GENL’s historicals for more clarity.

  3. Other Interesting Stocks: It’s worth checking to see how GENL 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.