Yahoo Finance One Thing To Consider Before Buying ATS Automation Tooling Systems Inc (TSE:ATA)
If you’re interested in ATS Automation Tooling Systems Inc (TSE:ATA), 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. 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 second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the 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 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.
View our latest analysis for ATS Automation Tooling Systems
What we can learn from ATA’s beta value
As it happens, ATS Automation Tooling Systems has a five year beta of 1.06. 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. 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 ATS Automation Tooling Systems’s revenue and earnings in the image below.
How does ATA’s size impact its beta?
ATS Automation Tooling Systems is a small cap stock with a market capitalisation of CA$2.08b. Most companies this size are actively traded. It takes less capital to move the share price of small companies, and they are also more impacted by company specific events, so it’s a bit of a surprise that the beta is so close to the overall market.
What this means for you:
ATS Automation Tooling Systems has a beta value quite close to that of the overall market. That doesn’t tell us much on its own, so it is probably worth considering whether the company is growing, if you’re looking for stocks that will go up more than the overall market. In order to fully understand whether ATA is a good investment for you, we also need to consider important company-specific fundamentals such as ATS Automation Tooling Systems’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 ATA’s future growth? Take a look at our free research report of analyst consensus for ATA’s outlook.
Past Track Record: Has ATA 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 ATA’s historicals for more clarity.
Other Interesting Stocks: It’s worth checking to see how ATA measures up against other companies on valuation. You could start with this free list of prospective options.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
