ASX:EXG Income Statement Oct 24th 17
Can EXG’s asset-composition point to a higher 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 EXG’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%, EXG appears to be a company that invests a large amount of capital in assets that are hard to scale down on short-notice. Thus, we can expect EXG 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. This outcome contradicts EXG’s current beta value which indicates a below-average volatility.
What this means for you:
Are you a shareholder? You could benefit from lower risk during times of economic decline by holding onto EXG. Take into account your portfolio sensitivity to the market before you invest in the stock, as well as where we are in the current economic cycle. Depending on the composition of your portfolio, EXG may be a valuable stock to hold onto in order to cushion the impact of a downturn. For next steps, take a look at EXG’s outlook to see what analysts are expecting for the stock on our free analysis plaform here.
Are you a potential investor? Depending on the composition of your portfolio, EXG may be a valuable addition to cushion the impact of a downturn. Potential investors should look into its fundamental factors such as its current valuation and financial health. Take into account your portfolio sensitivity to the market before you invest in EXG, as well as where we are in the current economic cycle. You can examine these factors in our free fundamental research report for EXG 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.