Yahoo Finance Why You Need To Look At This Factor Before Buying Anheuser-Busch InBev SA/NV (EBR:ABI)
If you are a shareholder in Anheuser-Busch InBev SA/NV’s (ENXTBR:ABI), or are thinking about investing in the company, knowing how it contributes to the risk and reward profile of your portfolio is important. ABI is exposed to market-wide risk, which arises from investing in the stock market. This risk reflects changes in economic and political factors that affects all stocks, and is measured by its beta. Not every stock is exposed to the same level of market risk, and the market as a whole represents a beta value of one. A stock with a beta greater than one is expected to exhibit higher volatility resulting from market-wide shocks compared to one with a beta below one.
Check out our latest analysis for Anheuser-Busch InBev
What is ABI’s market risk?
With a five-year beta of 0.68, Anheuser-Busch InBev appears to be a less volatile company compared to the rest of the market. This means the stock is more defensive against the ups and downs of a stock market, moving by less than the entire market index in times of change. ABI’s beta indicates it is a stock that investors may find valuable if they want to reduce the overall market risk exposure of their stock portfolio.
Does ABI’s size and industry impact the expected beta?
ABI has a market capitalization of €154.89B, putting it in the category of established companies, which are found to experience less relative risk compared to small-sized companies. Moreover, ABI’s industry, beverage, is considered to be defensive, which means it is more volatile than the market over the economic cycle. As a result, we should expect lower beta for larger stocks in a defensive industry compared to smaller stocks in a cyclical industry. This supports our interpretation of ABI’s beta value discussed above. Fundamental factors can also drive the defensiveness of the stock, which we will take a look at next.
Can ABI’s asset-composition point to a higher beta?
During times of economic downturn, low demand may cause companies to readjust production of their goods and services. It is more difficult for companies to lower their cost, if the majority of these costs are generated by fixed assets. Therefore, this is a type of risk which is associated with higher beta. I test ABI’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Given that fixed assets make up less than a third of the company’s total assets, ABI doesn’t rely heavily upon these expensive, inflexible assets to run its business during downturns. Thus, we can expect ABI to be more stable in the face of market movements, relative to its peers of similar size but with a higher portion of fixed assets on their books. Similarly, ABI’s beta value conveys the same message.
What this means for you:
You may reap the benefit of muted movements during times of economic decline by holding onto ABI. Its low fixed cost also means that, in terms of operating leverage, its costs are relatively malleable to preserve margins. In order to fully understand whether ABI is a good investment for you, we also need to consider important company-specific fundamentals such as Anheuser-Busch InBev’s financial health and performance track record. I urge you to complete your research by taking a look at the following:
Future Outlook: What are well-informed industry analysts predicting for ABI’s future growth? Take a look at our free research report of analyst consensus for ABI’s outlook.
Past Track Record: Has ABI 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 ABI’s historicals for more clarity.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see pass 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.
