Yahoo Finance What Kind Of Share Price Volatility Should You Expect For Impac Mortgage Holdings, Inc. (NYSEMKT:IMH)?
Anyone researching Impac Mortgage Holdings, Inc. (NYSEMKT:IMH) 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 category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. The second sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all stocks on the market.
Some stocks are more sensitive to general market forces than others. Beta can be a useful tool to understand how much a stock is influenced by market risk (volatility). However, Warren Buffett said 'volatility is far from synonymous with risk' in his 2014 letter to investors. So, while useful, beta is not the only metric to consider. To use beta as an investor, you must first understand that the overall market has a beta of 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 Impac Mortgage Holdings
What does IMH's beta value mean to investors?
While history does not always repeat, this level of beta may indicate that the stock price will continue to be exposed to market risk, albeit not overly so. 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 Impac Mortgage Holdings's revenue and earnings in the image below.
Could IMH's size cause it to be more volatile?
Impac Mortgage Holdings is a noticeably small company, with a market capitalisation of US$111m. Most companies this size are not always actively traded. It doesn't take much money to really move the share price of a company as small as this one. That makes it somewhat unusual that it has a beta value so close to the overall market.
What this means for you:
It is probable that there is a link between the share price of Impac Mortgage Holdings 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 IMH is a good investment for you, we also need to consider important company-specific fundamentals such as Impac Mortgage Holdings’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 IMH’s future growth? Take a look at our free research report of analyst consensus for IMH’s outlook.
Past Track Record: Has IMH 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 IMH's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how IMH 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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