Central Rand Gold Limited (AIM:CRND): How Does It Impact Your Portfolio?

More

How CRND’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 CRND’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Given that fixed assets make up less than a third of the company’s total assets, CRND doesn’t rely heavily upon these expensive, inflexible assets to run its business during downturns. Thus, we can expect CRND to be more stable in the face of market movements, relative to its peers of similar size but with a higher portion of fixed assets on their books. However, this is the opposite to what CRND’s actual beta value suggests, which is higher stock volatility relative to the market.

What this means for you:

Are you a shareholder? You may reap the gains of CRND’s returns during times of economic growth by holding the stock. Its low fixed cost also implies that it has the flexibility to adjust its cost to preserve margins during times of a downturn. I recommend analysing the stock in terms of your current portfolio composition before deciding to invest more into CRND. For more company-specific research on CRND, check out our our free analysis plaform here.

Are you a potential investor? Before you buy CRND, you should take into account how their portfolio currently moves with the market, in addition to the current economic environment. CRND may be a valuable addition to portfolios during times of economic growth, and it may be work looking further into fundamental factors such as current valuation and financial health. You can examine these factors in our free fundamental research report for CRND 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.