TSXV:TGX Income Statement Nov 9th 17
How TGX’s assets could affect its 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 examine TGX’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. With a fixed-assets-to-total-assets ratio of greater than 30%, TGX 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 TGX indicates a higher beta than a similar size company with a lower portion of fixed assets on their balance sheet. This outcome contradicts TGX’s current beta value which indicates a below-average volatility.
What this means for you:
Are you a shareholder? TGX may be a worthwhile stock to hold onto in order to cushion the impact of a downturn. Depending on the composition of your portfolio, low-beta stocks such as TGX is valuable to lower your risk of market exposure, in particular, during times of economic decline. For next steps, take a look at TGX’s outlook to see what analysts are expecting for the stock on our free analysis plaform here.
Are you a potential investor? Before you buy TGX, you should look at the stock in conjunction with their current portfolio holdings. TGX may be a great cushion during times of economic downturns due to its low beta. However, its high fixed cost may mean margins are squeezed if demand is low. I recommend taking into account its fundamentals as well before leaping into the investment. You can examine these factors in our free fundamental research report for TGX 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.