ASX:FCR Income Statement Oct 28th 17
Can FCR’s asset-composition point to a higher 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 examine FCR’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%, FCR 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 FCR 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. Similarly, FCR’s beta value conveys the same message.
What this means for you:
Are you a shareholder? You could benefit from higher returns from FCR during times of economic growth. Its higher fixed cost isn’t a major concern given margins are covered with high consumer demand. However, in times of a downturn, it may be safe to look at a more defensive stock which can cushion the impact of lower demand. For more company-specific research on FCR, check out our our free analysis plaform here.
Are you a potential investor? I recommend that you look into FCR’s fundamental factors such as its current valuation and financial health as well. 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. FCR may be a great investment during times of economic growth. You can examine these factors in our free fundamental research report for FCR 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.