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Is The Mission Marketing Group plc (LON:TMMG) A Volatile Stock?

If you're interested in The Mission Marketing Group plc (LON:TMMG), then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. 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. Any stock with a beta of greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or poorly correlated with the market.

View our latest analysis for Mission Marketing Group

What does TMMG's beta value mean to investors?

Mission Marketing Group has a five-year beta of 1.03. This is reasonably close to the market beta of 1, so the stock has in the past displayed similar levels of volatility to the overall market. If the future looks like the past, we could therefore consider it likely that the stock price will experience share price volatility that is roughly similar to the overall market. 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 Mission Marketing Group's revenue and earnings in the image below.

AIM:TMMG Income Statement, August 23rd 2019
AIM:TMMG Income Statement, August 23rd 2019

How does TMMG's size impact its beta?

Mission Marketing Group is a rather small company. It has a market capitalisation of UK£62m, which means it is probably under the radar of most investors. 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:

Since Mission Marketing Group has a beta close to one, it will probably show a positive return when the market is moving up, based on history. If you're trying to generate better returns than the market, it would be worth thinking about other metrics such as cashflows, dividends and revenue growth might be a more useful guide to the future. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Mission Marketing Group’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

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  1. Future Outlook: What are well-informed industry analysts predicting for TMMG’s future growth? Take a look at our free research report of analyst consensus for TMMG’s outlook.

  2. Past Track Record: Has TMMG 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 TMMG's historicals for more clarity.

  3. Other Interesting Stocks: It's worth checking to see how TMMG measures up against other companies on valuation. You could start with this free list of prospective options.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.