Yahoo Finance How Does Investing In Boxhill Technologies Plc (LON:BOX) Impact Your Portfolio?
If you are looking to invest in Boxhill Technologies Plc’s (AIM:BOX), or currently own the stock, then you need to understand its beta in order to understand how it can affect the risk of your portfolio. The beta measures BOX’s exposure to the wider market risk, which reflects changes in economic and political factors. Not all stocks are expose to the same level of market risk, and the market as a whole represents a beta value of one. Any stock with a beta of greater than one is considered more volatile than the market, and those with a beta less than one is generally less volatile.
View our latest analysis for Boxhill Technologies
What is BOX’s market risk?
Boxhill Technologies’s beta of 0.29 indicates that the stock value will be less variable compared to the whole stock market. This means the stock is more defensive against the ups and downs of a stock market, moving by less than the entire market index in times of change. Based on this beta value, BOX appears to be a stock that an investor with a high-beta portfolio would look for to reduce risk exposure to the market.
How does BOX’s size and industry impact its risk?
With a market cap of UK£2.11M, BOX falls within the small-cap spectrum of stocks, which are found to experience higher relative risk compared to larger companies. Moreover, BOX’s industry, hospitality, is considered to be cyclical, which means it is more volatile than the market over the economic cycle. As a result, we should expect a high beta for the small-cap BOX but a low beta for the hospitality industry. It seems as though there is an inconsistency in risks portrayed by BOX’s size and industry relative to its actual beta value. There may be a more fundamental driver which can explain this inconsistency, which we will examine below.
Can BOX’s asset-composition point to a higher beta?
An asset-heavy company tends to have a higher beta because the risk associated with running fixed assets during a downturn is highly expensive. I test BOX’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Considering fixed assets is virtually non-existent in BOX’s operations, it has low dependency on fixed costs to generate revenue. Thus, we can expect BOX to be more stable in the face of market movements, relative to its peers of similar size but with a higher portion of fixed assets on their books. Similarly, BOX’s beta value conveys the same message.
What this means for you:
You may reap the benefit of muted movements during times of economic decline by holding onto BOX. Its low fixed cost also means that, in terms of operating leverage, its costs are relatively malleable to preserve margins. In order to fully understand whether BOX is a good investment for you, we also need to consider important company-specific fundamentals such as Boxhill Technologies’s financial health and performance track record. I urge you to complete your research by taking a look at the following:
Financial Health: Is BOX’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Past Track Record: Has BOX 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 BOX’s historicals for more clarity.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see pass 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.
