ASX:FYI Income Statement Nov 2nd 17
Is FYI’s cost structure indicative of a high 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 FYI’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. Given that fixed assets make up an insignificant portion of total assets, FYI doesn’t rely heavily upon these expensive, inflexible assets to run its business during downturns. Thus, we can expect FYI 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. This is consistent with is current beta value which also indicates low volatility.
What this means for you:
Are you a shareholder? You could benefit from lower risk during times of economic decline by holding onto FYI. 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, FYI may be a valuable stock to hold onto in order to cushion the impact of a downturn. For next steps, take a look at FYI’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 FYI, you should look at the stock in conjunction with their current portfolio holdings. FYI may be a great cushion during times of economic downturns due to its low beta, but before leaping into the investment, I recommend taking into account its fundamentals as well. You can examine these factors in our free fundamental research report for FYI 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.