Yahoo Finance What Kind Of Share Price Volatility Should You Expect For Global Ship Lease, Inc. (NYSE:GSL)?
Anyone researching Global Ship Lease, Inc. (NYSE:GSL) might want to consider the historical volatility of the share price. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. The first category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. 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.
Check out our latest analysis for Global Ship Lease
What we can learn from GSL's beta value
Given that it has a beta of 1.54, we can surmise that the Global Ship Lease share price has been fairly sensitive to market volatility (over the last 5 years). If the past is any guide, we would expect that Global Ship Lease shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. Beta is worth considering, but it's also important to consider whether Global Ship Lease is growing earnings and revenue. You can take a look for yourself, below.
Does GSL's size influence the expected beta?
Global Ship Lease is a rather small company. It has a market capitalisation of US$73m, which means it is probably under the radar of most investors. It has a relatively high beta, suggesting it is fairly actively traded for a company of its size. Because it takes less capital to move the share price of a small company like this, when a stock this size is actively traded it is quite often more sensitive to market volatility than similar large companies.
What this means for you:
Beta only tells us that the Global Ship Lease 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 Global Ship Lease’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 GSL’s future growth? Take a look at our free research report of analyst consensus for GSL’s outlook.
Past Track Record: Has GSL 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 GSL's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how GSL measures up against other companies on valuation. You could start with this free list of prospective options.
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