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What is driving the Burberry share price (LON:BRBY)?

Jack Brumby

Stockopedia’s ‘High Flyers’ are the stock market superstars. These companies tend to be the ones that fund managers jostle and barter over. They are high quality, growing stocks with a history of beating estimates - and Burberry (LON:BRBY)is one of them.

Burberry is a large cap stock in the Apparel & Accessories Retailers industry. When we analyse Burberry from a factor perspective, we find that it has a Quality Rank of 98, a Momentum Rank of 93, but a Value Rank of only 22. This is the classic factor profile of a High Flyer.

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A combination of high quality, high momentum and low value is great when earnings go up but a bad place to be when things go wrong. The higher they rise the harder they fall, after all - and few stocks stay High Flyers for long. Mean reversion is a very real thing and it works like gravity on growth.

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What kind of High Flying stock is LON:BRBY?

So, High Flyers tend to be riskier and more volatile than the market average. Is this the case with Burberry?

One way to find out is by looking at Stockopedia’s RiskRatings system, which splits the stock market into five buckets according to stock price volatility. The five classifications (from least to most volatile) are:

  • Conservative (10% of the market)
  • Balanced (15% of the market)
  • Adventurous (20% of the market)
  • Speculative (25% of the market)
  • Highly Speculative (30% of the market)

Burberry is an adventurous stock. This means that the group is in the riskier half of the market. That said, the group has been performing well recently - Burberry has a one-year relative strength of 11.2%, meaning it has outperformed the market.

Not only that, but we can see from Burberry’s above average five-year return on capital employed figure of 24.4% that the group has been highly profitable over multiple years. This suggests that Burberry can back up its favourable factor exposures and volatility characteristics with some kind of economic moat.

Find the rockstars of the stock market

High Flyers are great stocks to have in your portfolio if you think you need more momentum or quality - just look out for signs that momentum might be changing. If you want to see which other stocks qualify as High Flyers, you can find a comprehensive list on Stockopedia's StockRanks page.

Simple tools can help us better measure and understand the risks we take. That's why the Stockopedia team has been busy building new ways of understanding investment risks and company characteristics. In this webinar, we talk about two or our most popular innovations: StockRank Styles and RiskRatings. These indicators transform a ton of vital financial information into intuitive classifications, allowing you to get an instant feel for any company on any market - sign up for a free trial to see how your stocks stack up.