In This Article:
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Anyone researching Radiant Logistics, Inc. (NYSEMKT:RLGT) might want to consider the historical volatility of the share price. 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 sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all stocks on the market.
Some stocks are more sensitive to general market forces than others. Beta is a widely used metric to measure a stock's exposure to market risk (volatility). Before we go on, it's worth noting that Warren Buffett pointed out in his 2014 letter to shareholders that 'volatility is far from synonymous with risk.' Having said that, beta can still be rather useful. The first thing to understand about beta is 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.
View our latest analysis for Radiant Logistics
What we can learn from RLGT's beta value
Looking at the last five years, Radiant Logistics has a beta of 1.37. The fact that this is well above 1 indicates that its share price movements have shown sensitivity to overall market volatility. If the past is any guide, we would expect that Radiant Logistics shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. Beta is worth considering, but it's also important to consider whether Radiant Logistics is growing earnings and revenue. You can take a look for yourself, below.
How does RLGT's size impact its beta?
With a market capitalisation of US$315m, Radiant Logistics is a very small company by global standards. It is quite likely to be unknown to most investors. 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 Radiant Logistics has a reasonably high beta, it's worth considering why it is so heavily influenced by broader market sentiment. For example, it might be a high growth stock or have a lot of operating leverage in its business model. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Radiant Logistics’s financial health and performance track record. I urge you to continue your research by taking a look at the following: