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If you are looking to invest in ANF Immobilier’s (ENXTPA:ANF), or currently own the stock, then you need to understand its beta in order to understand how it can affect the risk of your portfolio. Every stock in the market is exposed to market risk, which arises from macroeconomic factors such as economic growth and geo-political tussles just to name a few. This is measured by its beta. Different characteristics of a stock expose it to various levels of market risk, and the market as a whole represents a beta of one. A stock with a beta greater than one is considered more sensitive to market-wide shocks compared to a stock that trades below the value of one.
See our latest analysis for ANF Immobilier
What is ANF’s market risk?
ANF Immobilier’s beta of 0.77 indicates that the company is less volatile relative to the diversified market portfolio. The stock will exhibit muted movements in both the downside and upside, in response to changing economic conditions, whereas the general market may move by a lot more. Based on this beta value, ANF appears to be a stock that an investor with a high-beta portfolio would look for to reduce risk exposure to the market.
Does ANF’s size and industry impact the expected beta?
With a market cap of €388.30M, ANF falls within the small-cap spectrum of stocks, which are found to experience higher relative risk compared to larger companies. In addition to size, ANF also operates in the reits industry, which has commonly demonstrated strong reactions to market-wide shocks. Therefore, investors may expect high beta associated with small companies, as well as those operating in the reits industry, relative to those more well-established firms in a more defensive industry. It seems as though there is an inconsistency in risks portrayed by ANF’s size and industry relative to its actual beta value. A potential driver of this variance can be a fundamental factor, which we will take a look at next.
Can ANF’s asset-composition point to a higher beta?
An asset-heavy company tends to have a higher beta because the risk associated with running fixed assets during a downturn is highly expensive. I test ANF’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. ANF’s fixed assets to total assets ratio of higher than 30% shows that the company uses up a big chunk of its capital on assets that are hard to scale up or down in short notice. Thus, we can expect ANF to be more volatile in the face of market movements, relative to its peers of similar size but with a lower proportion of fixed assets on their books. However, this is the opposite to what ANF’s actual beta value suggests, which is lower stock volatility relative to the market.