Yahoo Finance Does Salvatore Ferragamo S.p.A. (BIT:SFER) Have A Particularly Volatile Share Price?
Anyone researching Salvatore Ferragamo S.p.A. (BIT:SFER) 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. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the 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 mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. Beta is a widely used metric to measure a stock's exposure to market risk (volatility). Before we go on, it's worth noting that Warren Buffett pointed out in his 2014 letter to shareholders that 'volatility is far from synonymous with risk.' Having said that, beta can still be rather useful. The first thing to understand about beta is that the beta of the overall market is one. A stock with a beta below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.
See our latest analysis for Salvatore Ferragamo
What we can learn from SFER's beta value
As it happens, Salvatore Ferragamo has a five year beta of 0.99. This is fairly close to 1, so the stock has historically shown a somewhat similar level of volatility as the market. While history does not always repeat, this may indicate that the stock price will continue to be exposed to market risk, albeit not overly so. Beta is worth considering, but it's also important to consider whether Salvatore Ferragamo is growing earnings and revenue. You can take a look for yourself, below.
Could SFER's size cause it to be more volatile?
Salvatore Ferragamo is a reasonably big company, with a market capitalisation of €3.0b. Most companies this size are actively traded with decent volumes of shares changing hands each day. It's not overly surprising to see large companies with beta values reasonably close to the market average. After all, large companies make up a higher weighting of the index than do small companies.
What this means for you:
It is probable that there is a link between the share price of Salvatore Ferragamo and the broader market, since it has a beta value quite close to one. However, long term investors are generally well served by looking past market volatility and focussing on the underlying development of the business. If that's your game, metrics such as revenue, earnings and cash flow will be more useful. In order to fully understand whether SFER is a good investment for you, we also need to consider important company-specific fundamentals such as Salvatore Ferragamo’s financial health and performance track record. I urge you to continue your research by taking a look at the following:
Future Outlook: What are well-informed industry analysts predicting for SFER’s future growth? Take a look at our free research report of analyst consensus for SFER’s outlook.
Past Track Record: Has SFER 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 SFER's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how SFER 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.
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