Yahoo Movies How Owens & Minor, Inc. (NYSE:OMI) Can Impact Your Portfolio Volatility
Anyone researching Owens & Minor, Inc. (NYSE:OMI) 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 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.
Check out our latest analysis for Owens & Minor
What OMI's beta value tells investors
Zooming in on Owens & Minor, we see it has a five year beta of 1.39. This is above 1, so historically its share price has been influenced by the broader volatility of the stock market. If this beta value holds true in the future, Owens & Minor shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. 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 Owens & Minor's revenue and earnings in the image below.
Could OMI's size cause it to be more volatile?
Owens & Minor is a noticeably small company, with a market capitalisation of US$449m. Most companies this size are not always actively traded. It takes less money to influence the share price of a very small company. This may explain the excess volatility implied by this beta value.
What this means for you:
Since Owens & Minor tends to moves up when the market is going up, and down when it's going down, potential investors may wish to reflect on the overall market, when considering the stock. In order to fully understand whether OMI is a good investment for you, we also need to consider important company-specific fundamentals such as Owens & Minor’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 OMI’s future growth? Take a look at our free research report of analyst consensus for OMI’s outlook.
Past Track Record: Has OMI 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 OMI's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how OMI 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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