For Brouwerij Handelsmaatschappij NV’s (ENXTBR:COBH) shareholders, and also potential investors in the stock, understanding how the stock’s risk and return characteristics can impact your portfolio is important. The beta measures COBH’s exposure to the wider market risk, which reflects changes in economic and political factors. Different characteristics of a stock expose it to various levels of market risk, and the market as a whole represents a beta value of one. Any stock with a beta of greater than one is considered more volatile than the market, and those with a beta less than one is generally less volatile.
View our latest analysis for Brouwerij Handelsmaatschappij
What is COBH’s market risk?
Brouwerij Handelsmaatschappij’s beta of 0.09 indicates that the company is less volatile relative to the diversified market portfolio. 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. Based on this beta value, COBH appears to be a stock that an investor with a high-beta portfolio would look for to reduce risk exposure to the market.
Does COBH’s size and industry impact the expected beta?
With a market cap of €300.00M, COBH falls within the small-cap spectrum of stocks, which are found to experience higher relative risk compared to larger companies. However, COBH operates in the beverage industry, which has commonly demonstrated muted reactions to market-wide shocks. As a result, we should expect a high beta for the small-cap COBH but a low beta for the beverage industry. This is an interesting conclusion, since its size suggests COBH should be more volatile than it actually is. A potential driver of this variance can be a fundamental factor, which we will take a look at next.
How COBH’s assets could affect its 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 COBH’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. With a fixed-assets-to-total-assets ratio of greater than 30%, COBH appears to be a company that invests a large amount of capital in assets that are hard to scale down on short-notice. As a result, this aspect of COBH indicates a higher beta than a similar size company with a lower portion of fixed assets on their balance sheet. However, this is the opposite to what COBH’s actual beta value suggests, which is lower stock volatility relative to the market.